Natural gas futures rose toward the biggest one-day gain in almost five years on speculation a recovery in the US economy is gaining momentum, spurring demand for industrial fuels.

Natural gas for October delivery rose 42.6 cents, or 15%, to $3.255 per million British thermal units at the close of floor trading on the New York Mercantile Exchange.

A close at that price would be the largest one-day gain since 24 November, 2004.

The rally began after Energy Department data showed a smaller-than-forecast increase in US stockpiles.

Gas traded at $2.762 before the government stockpile report was released this morning.

Reports in recent days on manufacturing and unemployment have signaled the recession is easing, Tom Orr, director of research at brokerage Weeden & Company, said in a Bloomberg report.

“The biggest thing hanging over the head of gas was that the US economy was sluggish and not recovering,” Orr said.

“The sentiment has changed to a slightly improving posture.”

Orr said the break in futures above $3 triggered pre- arranged buy programmes, accelerating the move higher.

Supplies advanced 69 billion cubic feet to 3.392 trillion cubic feet in the week ended 4 September, the Energy Department said. Analysts forecast an increase of 72 billion.

“The number was a bit of a surprise and I think people were worried about it coming in on the bearish side,” Brad Florer, a trader at Kottke Associates, said.

“They were worried there would be a real flush” in the price.

Speculative short positions, or bets gas prices will fall, outnumbered long positions by 169,846 contracts on the New York exchange in the week ended 1 September, according to a report last week from the Washington-based Commodity Futures Trading Commission.

The number of short positions declined 3.9%.

“With a market that is very short, you can see this craziness occur,” Teri Viswanath, director of commodities research at Credit Suisse Securities said.

“Going short this week has been tough.”

Price gains can force short sellers to close their positions by buying contracts to lock in gains or limit losses.

“The US natural gas market is clearly oversupplied today and season-ending storage will likely set record highs,” Roger Read and Jeff Spittel, analysts at Natixis Bleichroeder, said in a report to clients today.

“Wellhead production peaked in February/March and, combined with a modest economic recovery, should eliminate the year-over-year oversupply by 31 March 2010.”

They forecast that futures prices will recover to average $6.50 per MMBtu next year.