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U.S. natural gas futures surged to more than $3 per million British thermal units for the first time in 16 months as unseasonably warm weather drove generators to burn more of the fuel than ever for this time of year.
The late-summer surge comes as more of the fuel is being burned to make up for lost power supplies while nuclear reactors and other plants shut for seasonal refueling and maintenance.
Gas producers Southwestern Energy and EQT were Tuesday's best performers among S&P 500 energy stocks.
The gas market is staging a dramatic comeback from March, when prices hit a 17-year low after a mild winter failed to stoke strong heating demand.
America's shale gas producers have scaled back drilling to reduce expenses, while blazing July and August heat helped trim a supply glut by spurring record consumption from power plants.
"Right now the market looks unusually strong and it doesn't want to back off," said Gene McGillian, manager of market research at Tradition Energy in Stamford, Conn. "We have forecasts for hot weather over the next week and the market continues to catch a bid."
Natural gas for October delivery surged 11.3 cents, or 3.9 percent, to $3.047 per million British thermal units on the New York Mercantile Exchange, the highest settlement since January 2015. They're up about 30 percent this year.
"Lower prices are finally starting to chew away on production," Het Shah, a New York-based analyst with Bloomberg New Energy Finance, said by phone Tuesday. "The Mid-continent is facing the most pressure, led by production declines in Texas, Oklahoma, and Arkansas."
Power-plant demand rebounded after tapering last week with milder weather. Gas deliveries to generators rose to 33.8 billion cubic feet for Tuesday, up 28 percent from the same time last year and a record high for the second half of the month, PointLogic Energy data show.
This comes as 23 nuclear units, accounting for about 23 percent of total capacity, are slated to shut for refueling in the three months through November, according to NukeWorker.com.
Meanwhile, production in the lower 48 states in September fell 1.8 billion cubic feet per day from a year ago, according to data compiled by Bloomberg. Gas inventories were 9.3 percent above the five-year average as of Sept. 9, compared with 54 percent in April.
Temperatures may be mostly above normal in much of the eastern U.S. from Sept. 30 through Oct. 4, according to MDA Weather Services. The high in Washington may be 81 degrees Fahrenheit (27 Celsius) on Oct. 4, 9 more than average, according to AccuWeather Inc. forecasts.
Prices are advancing amid "the realization of the tightness of the supply-demand balance," Tom Saal, senior vice president of energy trading at FCStone Latin America LLC, said Tuesday. "We still have some summerlike weather."