The flood of new natural gas supplies from U.S. shale exploration combined with stagnant demand due to the current U.S. economic woes lead natural gas prices to decline across the country by 38-49% from the first six months of 2011 to the first six months of 2012, according to research done by the Energy Information Administration (EIA).

The largest drop in average spot natural gas prices in key regional markets was found at Transco Zone 6 NY, which plummeted 49% to $2.87/MMBtu from 1H2011 to 2H2012. Chicago Citygates declined 45% over the same time to $2.43/MMBtu and the Henry Hub shed 44% of its value to $2.36/MMBtu, while Algonquin Citygates dropped 41% to $3.34/MMBtu.

Of the locations polled, the EIA found that PG&E Citygate in California had the smallest decline. But at 38% to $2.73/MMBtu, it was still considered significant.

“Rising production, record end-of-winter storage inventories and mild weather contributed to spot natural gas prices nearing their lowest levels in a decade until prices rebounded at most trading points to the high $2/MMBtu range by the end of June,” the EIA said.

The government agency said U.S. dry natural gas production was about 5% higher during the first half of 2012 compared to the same period in 2011, according to Bentek Energy.

“This growth has been largely driven by gains in the Marcellus shale, where production nearly doubled from June 2011 to June 2012 and now comprises about 9% of total U.S. dry gas production,” the EIA said. “Increases in the Marcellus basin helped offset: slower growth or even modest declines in other gas supply areas, lower deliveries of liquefied natural gas (LNG), reduced net imports (imports minus exports) via pipelines from Canada, and increased natural gas exports to Mexico.”

The production growth was not followed by a significant uptick in gas demand. Overall, natural gas consumption was up by just over 1% through the first half of the year, the EIA found. This disparity between supply and demand growth rates lead to U.S. record natural gas storage inventories at the close of the winter 2011/2012.

“As a result, storage operators or their customers have not needed to buy as much natural gas to inject in preparation for the upcoming winter or to manage day-to-day imbalances, and this has contributed to lower natural gas prices,” the EIA said. “Last month, total U.S. natural gas storage inventories in the Lower 48 states topped 3 Tcf for the first time ever during June.”

On Thursday morning the EIA reported that 24 Bcf was injected into underground storage for the week ending Aug. 3. While the build was deemed bullish for natural gas prices by analysts and traders, the 3,241 Bcf currently in storage still represents a 13.5% premium over the 2,855 Bcf five-year average for this week of the year.

Even as the EIA in its August 2012 EIA Short-Term Energy Outlook walked back it’s July prediction that there would be 4,000 Bcf in storage by the season’s end at the conclusion of October, it’s new forecast of 3,954 Bcf would still set a new record.