Oil price tumbles below $130; natural gas diving, too

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By The Associated Press

NEW YORK — Oil prices fell below $130 a barrel for the first time in more than a month Thursday, as a dramatic slide in prices continued for a third day along with a sharp sell-off in natural gas.

“The entire bullish scenario ... is starting to crack,” said James Cordier, president of Tampa, Fla.-based trading firms Liberty Trading Group and OptionSellers.com.

Light, sweet crude for August delivery dropped $5.31 to settle at $129.29 a barrel on the New York Mercantile Exchange. Prices have fallen more than $15 in just the past three days.

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Natural gas futures for August delivery fell more than 8 percent Thursday, marking their biggest one-day drop in nearly a year, according to Nathan Golz, researcher at Wachovia Securities in St. Louis. Prices for the key heating, cooking and power generation fuel have tumbled more than 20 percent since their peak before the Fourth of July, and are now trading at their lowest point since April.

A number of market observers say there was nothing supporting the run-up in natural gas prices, which peaked in early July, and that this week’s sell-off of oil has only helped speed the declines.

“Any time oil goes up or down on Nymex, it’s going to have a carry-over effect on natural gas,” said Michael Rieke, senior managing editor for power and gas at energy research firm Platts.

The immediate cause of Thursday’s sharp natural gas decline was a larger-than-expected build of U.S. supplies.

The Energy Department’s Energy Information Administration said in its weekly report that natural gas inventories held in underground storage in the lower 48 states rose by 104 billion cubic feet to more 2.31 trillion last week. Analysts had been expecting supplies to grow by only 86 billion to 91 billion cubic feet, according to a Platts survey.

Oil prices fell more than $10 over the previous two days on growing assumptions that inflation and other economic concerns could reduce demand for crude. A surprisingly large gain in oil and refined fuel inventories in the U.S. prolonged the selloff, because it suggested more supplies were heading into storage rather than consumers’ fuel tanks.

Reports of a pre-dawn explosion that damaged an oil pipeline in Nigeria’s restive south — the sort of threat to supply that has helped fuel crude’s recent rally — did little to prop up prices Thursday.

A Nigerian military official said the blast on a pipeline owned by Agip, a subsidiary of the Italian energy giant Eni SpA, “affected output,” although he did not say by how much.

Col. Chris Musa, head of the Bayelsa State military, also did not say how severe the damage was, and declined to comment on what might have caused the explosion or whether it had resulted in any casualties.

The company said a sudden drop in pressure led it to halt production on pipelines carrying 47,000 gallons of oil a day.

Attacks on oil industry infrastructure in the past two years have slashed oil output by almost a quarter in Nigeria, Africa’s top crude producer.

At the gas pump, prices held steady at a record $4.114 a gallon, according to auto club AAA, the Oil Price Information Service and Wright Express. Diesel rose to a new record of $4.845, up more than half a penny.