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The price of natural gas has dropped below $2 for the first time in more than a decade.
A mild winter and production boom have left the U.S. with more natural gas than Americans can consume. Storage facilities are quickly filling up. The glut has pushed down the futures price of gas 59 percent since it peaked at $4.85 last summer.
On Wednesday afternoon, the futures price passed a milestone. Gas fell to $1.991 per 1,000 cubic feet. The last time it went below $2 was Jan. 28, 2002, when it hit $1.91.
Cheaper gas has already lowered heating bills this winter, and air conditioning costs are expected to fall this summer because many utilities generate electricity with natural gas. Major American manufacturers -- including chemical companies, fertilizer plants, aluminum and steelmakers -- also should benefit as energy costs tumble.
"If you're a consumer, this is great news," independent petroleum analyst Stephen Schork said. "This could spark a real rebirth of American manufacturing."
Supplies of gas are high because improved drilling techniques have allowed companies to produce more from vast, gas-rich layers of underground rock. Homeowners also have been using less natural gas for heating, thanks to a mild winter..
Practically speaking, a one-day drop below $2 won't make much difference for consumers or the economy. But the ongoing slump in gas prices certainly will. Commodities traders also said that Wednesday's drop is an important indicator of how bloated the natural gas market has become. Natural gas supplies are 61 percent higher than the five-year average.
While consumers enjoy cheaper prices, producers will find it harder to turn a profit. Some have tried to slow production, but so far prices have continued to fall amid mild winter weather. Shares of natural gas producers Chesapeake, EQT Corp. and Energen Corp. dropped about 2 percent in afternoon trading.
Meanwhile, oil prices rose on positive signs for the economy and energy demand. The stock market is up. And aluminum maker Alcoa surprised Wall Street with a first-quarter profit, thanks to stronger sales to carmakers and other manufacturers. Alcoa is the first major company to announce earnings for the quarter.
Benchmark U.S. crude rose by $1.98 to $103 per barrel on Wednesday. Brent crude, which is used to price oil imported by U.S. refineries, increased by 48 cents to $120.36.
Retail gasoline prices fell by less than a penny to $3.915 per gallon, according to auto club AAA, Wright Express and Oil Price Information Service. Gasoline has dropped by about 2 cents over the past week, but it's still 64 cents higher than it was at the beginning of the year.
In other energy trading, heating oil rose by 2.07 cents to $3.1164 per gallon while gasoline futures climbed 4.33 cents to $3.2929 per gallon.
Follow Chris Kahn on Twitter at http://twitter.com/ChrisKahnAP