The Associated Press
NEW YORK (AP) - Natural gas prices fell to their lowest level in seven years Thursday after the government reported that increasing amounts of it are being placed into storage.
Natural gas, a key energy source for power plants around the country, has been building in storage caverns for most of the year as companies close offices and manufacturers switch off factories.
Natural gas tumbled more than 6 percent, or 18.5 cents to $2.725 per 1,000 cubic feet. The price dropped as low as $2.698 per 1,000 cubic feet earlier in the day, a price not seen since Aug. 7, 2002.
Crude, gasoline and heating oil futures fell as well, as hopes for an economic recovery dimmed on a rising number of bank failures and signs that China's economy was choking on a surplus of building materials.
Benchmark crude for October delivery gave up $1.07 to $70.36 a barrel on the New York Mercantile Exchange. Oil prices have been tumbling since they touched $75 a barrel on Tuesday.
"It's getting harder and harder to justify it at these prices," PFGBest analyst Phil Flynn said.
China, which is expected to lead major economies out of recession, said Wednesday that it will cut back on its investment in key manufacturing industries to cool off industries like building materials, steel and cement.
Meanwhile, the Federal Deposit Insurance Corp. reported growing levels of soured bank loans. The FDIC said U.S. banks lost $3.7 billion in second quarter, compared with profits of $4.7 billion last year.
Credit markets are still gummed up as banks big and small continue to struggle. As a result, consumers and businesses are spending less, and that includes spending energy.
Gasoline demand is falling, according to a government report released Wednesday.
Natural gas prices plunged early in the day when the Energy Information Administration reported that natural gas stocks added 54 billion cubic feet last week. The total supply now sits at 3.26 trillion cubic feet, more than 18 percent higher than the five-year average.
The amount in storage was starting to test the country's maximum capacity for natural gas. But EIA economist Jose Villar told The Associated Press that storage facilities have added about 100 billion cubic feet of extra space, giving suppliers more places to put it. The EIA will include details of the added capacity in a report to be published inthe next few weeks, Villar said.
At the pump, retail gas prices gave up two-tenths of a penny to $2.62 a gallon, according to auto club AAA, Wright Express and Oil Price Information Service. A gallon of regular gasoline is 11.5 cents more expensive than last month, but it's $1.047 cheaper than the same time last year.
In other Nymex trading, gasoline for September delivery fell 3.73 cents to $1.9453 a gallon and heating oil fell 3.51 cents to $1.8169 a gallon. In London, Brent crude fell $1.05 to $70.60.
Associated Press Writers Carlo Piovano in London and Eileen Ng in Kuala Lumpur contributed to this report.