updated 12/27/2005 5:34:13 PM ET 2005-12-27T22:34:13

Natural gas futures plunged 10 percent Tuesday, settling at their lowest level in three and a half months amid forecasts calling for mild U.S. weather over the next week. It was the third straight decline for natural gas prices, which have fallen 23 percent since Wednesday, and the selloff triggered a decline in other energy futures.

The drop in energy prices knocked down the shares of integrated oil and gas companies and independent petroleum producers.

January natural gas futures fell $1.261 to settle at $11.022 per 1,000 cubic feet on the New York Mercantile Exchange. It was the lowest closing price since the Sept. 13 settlement of $10.763, which was slightly above the level on the day Hurricane Katrina struck and knocked out significant Gulf of Mexico output.

Front-month natural gas futures reached an all-time intraday high of $15.78 in mid-December as cold weather and predictions of snow storms raised fears about supplies.

Now, with weather forecasters calling for higher than normal temperatures over the next week, the market sentiment has shifted.

"Speculators are tripping over themselves to get out," said Ed Silliere, a Nymex floor trader at New York-based Energy Merchant Intermarket Futures.

Silliere said that if natural gas futures failed to stabilize in the next day or two, prices could easily fall below $10. "So much for $15," he said.

Light sweet crude for February delivery briefly fell by more than $1 a barrel, then settled 27 cents lower at $58.16 a barrel on Nymex, where heating oil futures lost 6.83 cents to settle at $1.637 a gallon and gasoline declined 3.71 cents to settle at $1.5143 a gallon.

"It's all weather-related," said analyst Phil Flynn of Alaron Trading Corp. in Chicago. "Unseasonably warm temperatures here in the Midwest and elsewhere have taken the fear out of this market, at least for the near term."

Flynn said any cold snap this winter has the potential to drive prices higher.

Energy equities also fell Tuesday.

Shares of Exxon Mobil Corp. declined by 99 cents to $56.11 on the New York Stock Exchange, where shares of BP dropped by $1.35 to $63.45. The stock price of Anadarko Petroleum Corp. fell by $1.45 to $93.20 on the NYSE and Pioneer Natural Resources Co.'s slipped by $1.19 to $50.83.

According to Accuweather.com, temperatures in most of the United States apart from the Northwest will be higher than normal in the next six to 10 days.

Milder weather in the world's largest energy consuming nation means less heating-fuel consumption, which tends to put a downward pressure on oil prices.

Last week, the U.S. petroleum snapshot showed the supply of crude oil rose by 1.3 million barrels to 322.5 million barrels _ 12 percent above year ago levels.

But U.S. inventories of distillate fuel, which include heating oil and diesel, fell by 2.8 million barrels to 127.7 million barrels. Gasoline inventories declined by 300,000 barrels to 204.1 million barrels.

Crude futures have in recent weeks been reacting to fluctuations in Northern Hemisphere temperatures, especially in the U.S. Northeast, the world's biggest heating oil market.

The price of crude is 19 percent below its all-time high of $70.85 on Aug. 30 after Hurricane Katrina made landfall.

Traders were also awaiting the midweek release of a U.S. government supply report.

In news that could affect longer term prices, OPEC, which over the past year has tried to reduce market volatility by raising or lowering production, announced that it and Russia, the largest non-OPEC oil exporter, would meet annually on the ministerial level to coordinate policies.

The announcement followed a meeting in Moscow between OPEC's outgoing president, Sheik Ahmad Fahad Al Ahmed al-Sabah and Russia's minister of industry and energy, Viktor Khristenko.

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