NEW YORK (Dow Jones)--Natural gas futures soared 15% Thursday after U.S. inventory data slightly eased concerns about the possibility of a storage glut, prompting a flurry of bargain-buying as traders looked ahead to the winter heating season.

Natural gas for October delivery on the New York Mercantile Exchange settled 42.7 cents higher at $3.256 a million British thermal units - a one-month high. Prices jumped by the highest percentage in nearly five years. Futures fluctuated early in the trading day and climbed for the rest of the session after the storage data were released.

A slightly smaller-than-expected increase in U.S. gas stockpiles last week, reported Thursday, didn't change the overall supply picture, but it sent traders scrambling to buy back previously sold positions. The approach of winter weather is likely to boost gas prices as the fuel is used to heat homes, which means traders betting on falling gas prices may have been left in the lurch.

Natural gas prices have hit a series of seven-and-a-half-year lows, as market participants fled benchmark futures on worries that the U.S. could run out of storage space. A storage squeeze could spark a chain of events and eventually force gas producers to shut in production. Thursday's price jump is a sign that those worries may be unfounded.

"The larger story here is really just a seasonal one," said Tim Evans, an energy analyst with Citi Futures Perspective in New York. "Traders are starting to look ahead to winter withdrawal season and thinking that maybe inventories won't overflow beyond storage capacity."

Data from the Department of Energy showed that gas in storage rose by 69 billion cubic feet last week, just short of the 71 bcf average estimate of forecasts by analysts and traders participating in a Dow Jones Newswires survey.

Many analysts had predicted that storage facilities will reach full capacity - an estimated 4 trillion cubic feet - before the beginning of the winter heating season, when withdrawals from gas stockpiles usually begin.

Despite the signals given by Thursday's spike, U.S. natural gas supplies in storage, which currently stand at 3.392 trillion cubic feet, are 17% higher than they were this time last year. Demand from industrial consumers has been sluggish during the economic downturn, while output from onshore gas fields has been ample. Cool weather in the U.S. East and Midwest over the summer has curbed the demand for gas to generate electricity for air conditioning. The static supply-and-demand situation leaves some analysts skeptical that Thursday's move will be sustained.

"Unless we have a big storm in the Gulf of Mexico that disrupts production, these weekly storage numbers aren't really going to make a lot of difference to the market in the long run," said Jim Ritterbusch, the president of Ritterbusch & Associates, a Galena, Ill., energy advisory firm.


FUTURES SETTLEMENT NET CHANGE
Nymex Oct $3.256 +42.7c
Nymex Nov $4.249 +37.9c
Nymex Dec $4.956 +34.6c

CASH HUB RANGE PREVIOUS DAY
Henry Hub $2.61-$2.75 $2.60-$2.85
Transco 65 $2.69-$2.79 $2.74-$2.83
Tex East M3 $2.90-$3.03 $2.95-$3.06
Transco Z6 $2.84-$3.03 $2.99-$3.07
SoCal $2.75-$3.00 $2.89-$3.01
El Paso Perm $2.61-$2.77 $2.75-$2.82
El Paso SJ $2.65-$2.76 $2.70-$2.76
Waha $2.57-$2.76 $2.74-$2.79
Katy $2.55-$2.73 $2.65-$2.80

-By Christine Buurma, Dow Jones Newswires; 212-416-2143; christine.buurma@dowjones.com