The U.S. natural gas rally to a one-month high is defying a lull in demand that’s pushed supplies to a seasonal record.
Futures are heading for a second straight weekly advance, climbing even as mild weather widens the biggest inventory surplus since 2012. Bullish traders are betting that a cold spell in the U.S. East this weekend will boost heating fuel consumption, limiting gas stockpile gains as low prices prompt drillers to curtail output.
Gas is rebounding from a 17-year low even as production from shale reservoirs shows no sign of the steep decline needed to balance the market. Bullish traders are betting that a hot summer will stoke demand from power plants as an increase in U.S. gas exports erodes the supply glut.
“The market’s focused on the fact that it’s going to get a little bit cooler,” said Phil Flynn, a senior market analyst at Price Futures Group in Chicago. “If the weather starts to turn milder, though, the storage overhang is going to become more of an issue.”
Government data released Thursday showed the smallest drop ever in gas inventories for this time of year. Stockpiles fell by only 1 billion cubic feet, compared with the five-year average withdrawal of 81 billion, according to the U.S. Energy Information Administration.
Natural gas for April delivery rose 6.8 cents, or 3.6 percent, to $1.936 per million British thermal units on the New York Mercantile Exchange, the highest settlement since Feb. 17. Gas is up 6.3 percent this week.