01/11/2012 05:26 EST | Updated 03/12/2012 05:12 EDT

Natural gass at its lowest price in U.S. in a decard, oil under US$101 a barrel

NEW YORK, N.Y. - Oil prices fell more than a dollar to under US$101 a barrel Wednesday, while natural gas in the United States is the cheapest it's been in a decade.

Prices have for natural gas have dropped by more than 10 per cent in the past week, including a plunge of almost six per cent on Wednesday, as a mild winter cuts into heating demand and a production boom pumps up supplies.

U.S. homeowners should eventually benefit from lower heating and electric bills. "There's just too much gas out there, and there's no evidence that people are shutting in gas production yet to compensate," said Ron Denhardt, an analyst with Strategic Energy & Economic Research.

In other energy trading, benchmark West Texas Intermediate crude fell by 1.37 to finish at US$100.87 a barrel in New York. Brent crude, used to price oil varieties imported by U.S. refineries, fell by $1.04 to end at US$112.24 a barrel in London.

The winter of 2012 has yet to pack much punch, with average temperatures well above normal. December was particularly warm in the U.S. Northeast and upper Midwest, where homeowners typically face frigid weather and high winter heating bills. Meanwhile, long-range forecasts show above-average temperatures continuing over the next few weeks.

Natural gas supplies were already above the five-year average at the start of the year, and that's expected to continue. Analysts expect the U.S. Energy Department to report on Thursday that supplies dropped only slightly last week, according to Platts, the energy-information arm of McGraw-Hill Cos.

The natural gas futures contract fell 17 cents to end at US$2.77 per 1,000 cubic feet. Natural gas hasn't been this cheap at this time of year since 2002.

The U.S. Energy Information Administration's weekly report on petroleum supplies showed gasoline demand fell by 4.8 per cent last week from a year ago, while demand for all petroleum products dropped by 6.5 per cent.

As consumers and businesses cut back, producers put more into storage than analysts expected. Oil supplies rose by five million barrels last week while gasoline supplies grew by 3.6 million barrels.

Distillate supplies — including diesel and heating oil — increased by four million barrels. Analysts had expected oil supplies to shrink by a million barrels last week, with gasoline and distillate supplies rising by 1.75 million and 1.35 million barrels, respectively.

Oil prices began falling after Germany said its economy contracted in the final three months of 2011.That raised concerns about the rest of Europe's economy.

Germany, the eurozone's strongest member, is expected to prop up its neighbours as they work to overcome massive government debts. If the region slides into recession, oil demand will likely decline.

Heating oil lost 4 cents to finish at US$3.06 a U.S. gallon (3.79 litres) and gasoline futures fell one cent to end at US$2.76 a gallon.