NEW YORK (AP) — Natural gas prices climbed 6 percent Thursday after the government said the nation's supplies shrank last week.
Gas supplies dropped by 132 billion cubic feet last week, according to the Energy Information Administration. The decline was more than analysts expected, but the overall storage level of 2.97 trillion cubic feet remains well above five-year levels for this time of year.
Natural gas supplies have been growing in recent years as producers develop more deposits in shale formations across the country. Mild weather in much of the U.S. this winter has kept demand low. About half the homes in the nation use gas for heating.
Natural gas futures rose 14 cents to $2.53 per 1,000 cubic feet in New York.
The EIA report encouraged investors who are betting that gas prices near 10-year lows will force petroleum companies to cut production. Chesapeake Energy, America's second largest natural gas producer, said last month that it would trim production by about 500 million cubic feet per day and ConocoPhillips said it is considering shutting down another 100 million cubic feet per day of production.
Analysts say other producers must do the same to keep supplies from growing. Goldman Sachs analyst David Greely this week said U.S. gas production will keep growing in 2012 and 2013, but less than previously thought.
"We've reached a point where they need to rein in production," independent energy analyst Stephen Schork said. "They just can't make money."
Natural gas hit a 10-year low last month at $2.32 per 1,000 cubic feet, and the price is still less than half of it what it was in 2010.
Meanwhile benchmark crude fell by $1.61 to $96 per barrel in New York, reflecting weak demand for petroleum products in the U.S. Brent crude fell by 9 cents to $111.47 per barrel in London.
The government said Wednesday that demand for petroleum products fell by 4.3 percent last week when compared with a year ago. Gasoline demand dropped by 7.3 percent, and demand for distillates — which include diesel and heating oil — fell by 1.7 percent.
Retail gasoline prices rose less than a penny to a national average of $3.46 per gallon, according to AAA, Wright Express and Oil Price Information Service. A gallon of regular is about 18 cents higher than a month ago and 35 cents higher than a year ago.
In other energy trading, heating oil fell by 1 cent to $3.04 per gallon and gasoline futures fell by 4 cents to $2.85 per gallon.
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