Natural gas prices jump 13 percent

Natural gas demonstrated again how much it has split from the direction of crude, as prices spiked more than 13 percent despite an enormous glut in supply.

Crude prices fell for the second straight trading day.

Analysts at Goldman Sachs said prices for natural gas may even triple over the winter, though most energy experts believe there is a far greater chance that prices will plunge again.

There are two big factors that support the latter view, which would mean extremely cheap heating bills for a lot of people over the next few months.

The first is that natural gas in storage is 17 percent greater than it was last year and has even neared the maximum storage capacity in some places. And the U.S Energy Information Administration said in its short-term energy outlook that it expects another 12 percent buildup through October.

At the same time meteorologists predict a very mild winter for most of the country. With demand already way down from industrial utility customers, the U.S. has an enormous amount of unused natural gas.

Natural gas prices settled 33.7 cents higher at $3.297 per 1,000 cubic feet.

Meanwhile, managers of the United States Natural Gas fund, an exchange-traded fund that tracks natural gas prices, said it will again offer shares before the end of the month. The fund allows any investor to buy shares, which UNG uses to buy natural gas contracts on Nymex and the ICE Futures exchange.

UNG shares have been selling at a premium because they are in short supply. The fund over the summer sought permission from the Securities and Exchange Commission to offer another billion units.

Contrary to how they have traded in the past, natural gas and crude futures have taken divergent paths throughout the year, and that was true again on Monday.

Benchmark crude for October delivery fell 43 cents to settle at $68.86 a barrel. On Friday, the contract tumbled $2.65 to settle at $69.29.

A lot of pressure has been placed on the dollar-based crude because the dollar has rebounded in recent days. Still, prices have doubled from earlier this year during what may have been the depth of the recession.

A lot of experts believe that optimism is premature on both counts because crude now held in in storage, like natural gas, remains at very high levels.

“At some point hope has to become a reality or prices will have to adjust accordingly,” said PFGBest analyst Phil Flynn.

At the pump, the average price for a gallon of regular gasoline fell a tenth of a cent to $2.572, according to auto club AAA, Wright Express and Oil Price Information Service. That’s 7.3 cents more than a month ago, but $1.22 less than at this time last year.

Gasoline for October delivery on the Nymex fell 1.65 cents to settle at $1.7433 a gallon.

Prices have most certainly peaked for most motorists this year, barring some disruption in the Gulf of Mexico.

“The ‘driving season’ is over … and supplies are greater today than in May,” analyst and trader Stephen Schork wrote in his morning report.

In other Nymex trading, heating oil for October delivery rose 1.14 cents to settle at $1.7422 a gallon.

In London, Brent crude fell 13 cents to $67.56 on the ICE Futures exchange.

Associated Press Writers Pablo Gorondi in Budapest, Hungary, Alex Kennedy in Singapore and Stephen Bernard in New York contributed to this report.