While oil continues to rise to new highs, the price of natural gas dropped 2 percent Thursday and has remained relatively flat since the recession.
Traders say the reason is simple: oil is traded internationally and is heavily influenced by demand from China and other emerging economies. The U.S. is awash in natural gas but lacks the infrastructure to export it, and a recent boom in production has kept prices in check.
The contrast between the two was clear on Thursday. Natural gas plunged after the government said supplies dropped less than expected. It gave up 8.9 cents to settle at $4.057 per 1,000 cubic feet. Meanwhile, oil surged to $110.30 per barrel, reaching a new 30-month high, even though U.S. oil supplies have been increasing. They grew by 2 million barrels last week, according to the Energy Department.
Oil and natural gas seemed to be in lockstep in 2008, when prices for both spiked. "But there's really no relationship between them anymore," analyst Jim Ritterbusch said. The average price for natural gas dropped 5 percent last month, when compared with March of last year. Oil, on the other hand, surged 27 percent in the same period.
The emergence of shale gas drilling in the U.S. likely will keep natural gas storage facilities filled with a hefty surplus, Ritterbusch said. New technologies have helped drillers tap vast underground reserves that are estimated to be large enough to supply the U.S. for more than a century.
Shale gas production has soared more than 12-fold in the last decade, according to the Energy Information Administration.
Even after an especially chilly winter, when homes and businesses cranked up the heat, natural gas supplies haven't dropped as much as expected.
The EIA reported that natural gas stocks fell by 45 billion cubic feet last week. Analysts expected an even bigger drop of between 49 to 53 billion cubic feet. The report was another sign that "good demand is not even putting a dent in supply," analyst and trader Stephen Schork said.
Meanwhile, gasoline pump prices are still rising and setting records for this time of year. The national average increased nearly 2 cents on Thursday to $3.725 per gallon, according to AAA, Wright Express and Oil Price Information Service. A gallon of regular increased by 20.8 cents in the last month and is 88.1 cents higher than last year.
Americans are paying $247 million more per day at the pump than they were at the start of the year.
In other Nymex contracts for May delivery, heating oil lost 1.48 cents to settle at $3.2060 per gallon and gasoline futures lost 0.64 cents to settle at $3.1865 per gallon.
In London, Brent crude gained 33 cents to settle at $122.26 per barrel on the ICE Futures exchange.