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Natural gas prices back near 10-year lows as production booms, supplies at record levels
NEW YORK (AP) ' The price of natural gas dropped back near a 10-year low Wednesday after Exxon Mobil and other energy companies declined to cut production.
Exxon, America's biggest natural gas producer, has led a push by major industry players into U.S. gas drilling over the past few years that has boosted production to the highest levels ever. Supplies in storage are well above average, and some experts estimate the nation has enough natural gas to meet its needs for a century.
Investors hoped that Exxon would follow smaller competitors like Chesapeake Energy and shut down some natural gas rigs. But when it released its quarterly and annual earnings results Tuesday, Exxon said it will not slow natural gas production.
"We remain bullish on the future of natural gas as an energy source," Exxon investor relations chief David Rosenthal said.
The company has started to shift its focus to developing more oil in the U.S., but "we have not curtailed any gas production," Rosenthal said.
On Wednesday the price of natural gas fell 10 cents, or 4 percent, to $2.40 per 1,000 cubic feet in New York. That follows an 8 percent drop on Tuesday. Natural hit a 10-year low on Jan. 19 at $2.32 per 1,000 cubic feet. The price rose briefly, after Chesapeake and other companies said they would cut natural gas production. It slid back as investors lost faith that the reductions would significantly impact supplies and mild winter weather persisted, keeping demand weak.
Independent energy analyst Jim Ritterbusch said traders have been looking for signs that other producers will do more to shrink America's huge natural gas surplus. It doesn't appear that they're willing ' or able ' to do so.
"The market is craving news about production cuts or colder weather" that would force homeowners to crank up the heat, he said. "It's not getting it."
A sustained decline in natural gas prices will benefit the U.S. economy by reducing heating and electricity costs for many homeowners and businesses. More than half of U.S. residences use natural gas for heat. And power companies are increasingly turning from coal to cheaper, cleaner natural gas to run generators.
Meanwhile benchmark oil prices were flat Wednesday. West Texas Intermediate crude rose 1 cent to $98.49 per barrel in New York. Brent crude rose by $1.34 to $112.32 a barrel in London.
Prices wavered after economic reports showed that the nation's crude supplies rose last week, and energy demand remains weak but could rise in the future.
The Energy Department said oil and gasoline demand dropped last week while supplies grew. At the same time, a trade group reported that manufacturing activity in the U.S. rose in January at the fastest pace in seven months, implying more demand for oil in the months ahead.
Retail gasoline prices added less than a penny on Wednesday at a national average of $3.45 per gallon, according to AAA, Wright Express and Oil Price Information Service. A gallon of regular is 17 cents higher than it was a month ago and 35 cents more than a year ago.
In other energy trading, heating oil rose a penny to $3.06 per gallon. Gasoline futures also rose by 1 cent, to $2.90 per gallon.
Follow Chris Kahn on Twitter at http://twitter.com/ChrisKahnAP