Rally in natural gas prices resumes after inventory report comes in weaker than expected

Natural gas rallies again after supplies report

The rally in natural gas prices picked back up Thursday after a report showing stockpiles for last week grew slightly less than expected.

A combination of the moratorium on deepwater drilling in the Gulf of Mexico because of the oil spill, the start of hurricane season and hot weather driving more natural gas use for air conditioning have helped pushed prices more than 27 percent higher since the end of May.

An Energy Information Administration report showed supplies of gas rose 87 billion cubic feet last week to 2.5 trillion cubic feet in the Lower 48. Analysts expected an increase of 88 billion cubic feet to 92 billion cubic feet.

Prices for the July contract for natural gas rose 18.4 cents to settle at $5.162 per 1,000 cubic feet on the New York Mercantile Exchange. Prices dropped 4 percent on Wednesday after investors took profits on the recent jump in prices, said Peter Beutel of Cameron Hanover.

Still, there’s been a clear upward trend in gas prices in recent weeks.

“It’s been a slow, steady, methodical move higher,” said oil and gas analyst and trader Stephen Schork.

Even with the recent increase, prices still are less than half of what they were two years ago when all energy prices spiked, a key factor in pushing the country into recession.

Supplies remain robust and the amount of gas in storage is well above average as producers become more proficient at drilling thousands of feet deep into reserves that have proven to be much bigger than previously thought and were unreachable just a few year ago.

Retail gasoline prices, which topped out at $4.11 per gallon two years ago, also edged higher Thursday after a six-week decline. Pump prices rose 0.7 cent to a national average of $2.707 per gallon, according to AAA, Wright Express and Oil Price Information Service. Prices have risen 0.1 cent in the past week and are down 15.2 cents over the past month. They are 2.8 cents higher than a year ago.

Oil prices, which also have moved higher over the past month, fell Thursday. Benchmark crude for July delivery dropped 88 cents to settle at $76.79 a barrel on the NYMEX.

In other Nymex trading, heating oil added 3.73 cents to settle at $2.1474 a gallon, and gasoline gained 1.88 cents at $2.1640 a gallon.

Brent crude rose 54 cents to settle at $78.68 a barrel on the ICE futures exchange.

Associated Press writers Nataliya Vasilyeva in Moscow and Alex Kennedy in Singapore contributed to this report.