Natural gas prices slump to 2010 low

NEW YORK (AP) - Natural gas prices on Thursday slumped to a record low for the year after the government reported a rise in U.S. supplies.

The contract for September delivery gave up 4.9 cents at $3.822 per 1,000 cubic feet on the New York Mercantile Exchange. Earlier in the day, it hit a 2010 low of $3.794.

The price of natural gas, which is used to produce electricity, tends to drop this time of year as the weather begins to cool and people turn off their air conditioners. Analysts said natural gas contracts should continue to fall over the next few months, and that should eventually push down energy costs for homes and businesses.

Meanwhile, retail gasoline prices continue to be pushed down by lower oil prices since the beginning of August.

Pump prices have dropped for 16 straight days. They fell less than a penny overnight to a new national average of $2.688 for a gallon of unleaded regular, according to AAA, Wright Express and Oil Price Information Service. A gallon of gas is 5.4 cents cheaper than a month ago but 6.6 cents more expensive than the same time last year.

Natural gas prices typically rise again as winter approaches and home owners crank up the heat. But overall, PFGBest analyst Phil Flynn said natural gas should become cheaper as drillers tap into larger sections of underground shale. America's vast natural-gas shale deposits are just beginning to be exploited, and the industry is expected to produce much more in coming years.

"Last September, we saw natural gas prices crash down to about $2.50 (per 1,000 cubic feet), and we saw producers cut back a bit" and waited for prices to rebound, Flynn said. "But because of shale gas, that point of pain — the point where they cut back — has been dropping."

Oil prices increased for a second day after six straight days of declines, as the dollar fell and investors latched onto a government report that new requests for unemployment benefits fell sharply last week.

Benchmark oil for October delivery added 97 cents to $73.49 on the Nymex. In London, Brent crude jumped $1.62 to $75.10 a barrel on the ICE Futures exchange. Oil has tumbled from a high of $82.55 earlier this month, and some investors are buying on the expectation that oil prices are set to rebound again, Flynn said.

"As long as Chinese demand remains strong and a case for global consumption strength next year is able to be argued, crude values could easily begin tracking north back toward the $80 area," independent analyst Jim Ritterbusch said.

In other Nymex trading in September contracts, heating oil rose 4.84 cents to $2.019 a gallon and gasoline gained 4.51 cents to $1.909 a gallon.

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Associated Press writers Pablo Gorondi in Budapest, Hungary and Eileen Ng in Kuala Lumpur, Malaysia, contributed to this report.