U.S. Gas Extends Gain to 22-Month High as Supply Glut Dwindles

U.S. natural gas futures jumped to a 22-month high on speculation that a supply glut will vanish just before a cold winter spurs demand for the heating fuel.

A stockpile surplus to the five-year average has narrowed to less than 6 percent from 54 percent in April. Temperatures may be mostly seasonal on the East Coast this week, with New York’s low dropping to 50 degrees Fahrenheit (10 Celsius) on Oct. 14, matching the normal reading, data from AccuWeather Inc. show.

The specter of winter supply constraints is looming over the gas market after demand from power generators surged to a record during a hot summer, limiting inventory gains. The fuel has been the best performer in the Bloomberg Commodity Index so far this quarter, marking a reversal for a market that saw the lowest prices since the 1990s earlier this year.

“The way we’re narrowing the surplus does raise questions about winter supplies,” Phil Flynn, senior market analyst at Price Futures Group, said by phone Monday. “We could see record demand for gas this winter with the retirement of coal plants.”

Gas futures for November delivery climbed 8.2 cents to $3.275 per million British thermal units on the New York Mercantile Exchange, the highest settlement since Dec. 19, 2014.

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