Oil prices have gone through the roof lately. But natural gas keeps going the other direction.

At $2.361 per million British thermal units as of this morning, natural gas is just 3.9 cents above the 10-year low of $2.322 it hit on January 19. That’s about half the price of what natural gas was back in July, when it nearly hit $5 per MMBtu.

Mild winter conditions across the U.S. are largely to blame for natural gas’s troubles. Above-normal temperatures across the country have meant less national demand for the fossil fuel. The March forecast is for an equally moderate climate, which is why natural-gas futures continue to plummet.

Oversupply and lack of demand have been a killer combination for natural gas. Compared to the much harsher winter of 2010-11, natural-gas usage is well down. There are 208 fewer natural-gas-drilling rigs in operation right now than there were at this time last year – a 23% decline.

Some analysts are projecting that record supplies of natural gas will remain after the winter is over. That’s likely to keep natural gas prices cheap until at least the summer, which along with winter is the other time when the resource is typically in high demand.

Meanwhile, oil prices keep rising. Because natural gas is used primarily to heat homes in winter, demand can fluctuate based on the weather. But people always need to drive, which keeps demand for oil high even when fuel prices reach outlandish levels.

Of course, the discount price at which natural gas is going for right now would seemingly make for some good buying opportunities. But that will happen only if natural-gas stock prices follow suit.

Our resident Resource Prospector Kevin McElroy says that hasn’t happened yet. Many of them are way overvalued at the moment. Once the stocks do become as cheap as the resource itself, however, natural gas may then be a good place to invest.

Published by Wyatt Investment Research at