Natural gas fell the most in nearly a year, reaching a three-month low, after a government report showed U.S. supplies rose last week more than analysts expected.

Stockpiles for the week ended July 11 rose 104 billion cubic feet, to 2.312 trillion, the Energy Department showed in a report today. Analysts had forecast storage would rise 88 billion cubic feet, according to the median of 22 analyst estimates compiled by Bloomberg News.

``The weather has not been really extreme,'' allowing storage to build, and ``domestic production has been up,'' said Michael Haigh, senior commodity strategist for Societe Generale in New York. Milder weather reduces the need for gas to operating electric generators to supply air conditioners.

Natural gas for August delivery fell 78.9 cents, or 6.9 percent, to $10.609 per million British thermal units at 1:44 p.m. on the New York Mercantile Exchange. Futures earlier slipped 8.2 percent, touching $10.464, the lowest since gas closed at $10.383 on April 17 and the biggest decline since Aug. 20, 2007, when if fell 14 percent. Gas traded at $11.348 before release of the report at 10:35 a.m. in Washington.

Normal or below-normal temperatures are probable in much of the U.S. in August, the Climate Prediction Center in Camp Springs, Maryland said in an outlook issued today.

Gas initially fell on the higher-than-expected inventory gain, which ``were a bit of a shocker,'' said Martin King an analyst at FirstEnergy Capital in Calgary. Then, there was ``some spillover selling being triggered by the oil complex, that's two negatives.''

Crude Falls

Crude oil fell for a third day, the longest price decline in a month, on signs slower global economic growth is curbing fuel consumption. Oil slid nearly $17 from last week's record $147.27 as U.S. demand dropped.

Crude oil for August delivery dropped $3.84, or 2.9 percent, to $130.76 a barrel in New York. Futures are up 77 percent from a year ago.

Natural gas has declined 21 percent since the July 3 close of $13.577, the highest price since Dec. 21, 2005, forcing those with so-called long positions to sell. Long trades are those placed anticipating prices will advance.

``People are taking profits and shorting it,'' said Peter Linder, a DeltaOne Energy Fund analyst and senior adviser in Calgary. ``It's really technical trading to a large extent.''

Through July 3, gas had advanced 81 percent this year, increasing operating costs for industrial, commercial and power- generation users. Their needs account for about 78 percent of gas use, according to the Energy Department.

Demand Destruction

With elevated gas prices ``we expected to see some industrial demand destruction and it seems like that is finally happening,'' said Cameron Horwitz, an analyst at SunTrust Robinson Humphrey in Houston.

During the same week last year, stockpiles increased 71 billion cubic feet. Inventories rose to a record 3.545 trillion cubic feet in November 2007. The five-year average in storage to start the winter demand period in November is 3.327 trillion cubic feet.

Supplies are 361 billion cubic feet, or 14 percent, below the same period in 2007 and 49 billion cubic feet, or 2.1 percent, less than the five-year average, the department said today.

``The increased inventory is a combination of demand destruction in the manufacturing sector and a relative increase in domestic natural production,'' said Paul Cicio, president of Washington-based Industrial Energy Consumers of America, a non- profit national industry trade association promoting the interests of manufacturing companies.

Domestic Output

Domestic gas available for sale may increase by 6 percent this year, compared with 4.6 percent forecast in May, the Energy Department said in its monthly Short-Term Energy Outlook released June 10. Higher production may prompt lower prices.

``We are finally seeing a reattachment to the fundamentals and a bottoming of the economy as a whole,'' said Drew Wozniak, vice president of market research for ICAP Energy in Louisville Kentucky. ``We are beyond where energy has been a safe haven.''

Manufacturing in the Philadelphia region shrank in July for an eighth-straight month as orders and employment sank. The Federal Reserve Bank of Philadelphia's general economic index improved to minus 16.3 from minus 17.1 in June, the bank said today. Negative readings signal a decline. The measure averaged 5.1 last year.

The housing recession, now in its third year, has depressed demand for building equipment and materials and hurt consumer spending.

`No Supply Problem'

`` There's no supply problem,'' said Ed Kennedy, a trader with Commercial Brokerage Corp. in Miami. ``There's plenty of gas to go into storage and there will be plenty unless we have another Katrina.''

A ``strong tropical wave'' moving toward the coast of Central America ``has a chance to become a tropical depression,'' according to an 8 a.m. New York time advisory from the Miami- based U.S. National Hurricane Center.

A separate low-pressure system in the Caribbean ``has become a little less organized'' and the potential for ``tropical depression formation'' has decreased, according to the report.

Tropical depressions can strengthen into a tropical storms and hurricanes Such storms that enter the Gulf of Mexico typically threaten natural gas and oil output from offshore production platforms.

Hurricanes Katrina and Rita curtailed Gulf of Mexico gas production, helping drive prices to $15.78 per million British thermal units on Dec. 13, 2005, the highest since the fuel began trading on the Nymex. The Atlantic Ocean hurricane season began June 1 and runs through November.