Natural gas price dips below $2 The US shale boom has pushed natural gas markets below $2 per million British thermal units for the first time in a decade as new supplies overwhelm consumption. The price is now almost 90 per cent below the all-time high of $15.78 per mBtu set in 2005 and a fraction of oil on an energy-equivalent basis. US gas costs far less than supplies in Asia and Europe, as limited export capacity has penned most of the hard-to-ship fuel inside domestic borders. The fall in US gas prices has stirred hopes of an industrial renaissance, with companies such as Royal Dutch Shell planning new plants in the US based on lower energy costs, though benefits may be concentrated in businesses such as petrochemicals and fertilisers. Natural gas for May delivery at Henry Hub in Louisiana, the futures pricing point, touched $1.999 per mBtu on Wednesday, retreating to the lowest point since January 2002. Gas at hubs in the Rocky Mountains producing region of the western US has recently sold for as little as $1.75. Benchmark gas is less than half the price of a year ago as drillers have used horizontal drilling and hydraulic fracturing to release the fuel from previously uneconomic shale rocks. Last year production grew by 4.8bn cubic feet per day, the biggest annual increase ever, the US Energy Information Administration said in a report this week. US marketed gas production in 2011 was the highest ever, surpassing a peak set in 1973. Low prices have prompted producers including Chesapeake Energy and Encana to announce cutbacks. Drillers are deploying almost a third fewer gas rigs than last October, according to Baker Hughes, an oil and gas service company that tracks the number of rigs in use. But EIA expects supplies will still expand by 3bn cu ft per day this year, growing faster than consumption. One reason production remains strong in spite of decade-low prices is that drilling rigs have been moved from so-called "dry" gas wells, which produce only gas, to "wet" gas wells that produce a mixture of gas, oil and so-called natural gas liquids, which are used in petrochemicals. With oil above $120 a barrel and prices even higher for natural gas liquids, companies maintain production to profit from liquids and treat cheap gas as a by-product. Gas stored in underground caverns is nearly 56 per cent higher than a year ago, suggesting supplies may test demonstrated capacity of 4.1tn cubic feet before heating demand resumes next winter. One source of fresh short-term demand may come from power plants switching from coal to gas. However, "right now we don't believe power can generate enough demand to limit storage from approaching capacity in the fall," said Logan Reese, manager of quantitative analysis at Bentek Energy. Producers have stepped back from derivatives markets rather than lock in poor profit margins. Renee Zenljak, executive vice-president of midstream marketing and fundamentals at Toronto-listed Encana, said one reason supplies kept climbing last year was that producers had sold output forward at higher prices. "Now that hedges are rolling off and companies aren't renewing them at loss-making futures prices, that will force discipline on the market," she said. Some consumers, such as manufacturers, are now also more comfortable being exposed to price fluctuations. "At very low prices, gas consumers don't feel need to hedge because they feel prices are so far away from levels that threaten to drive negative margins," said Brison Bickerton, strategist at Freepoint Commodities, a US-based physical energy merchant. Additional reporting by Ajay Makan in New York