On the New York Mercantile Exchange, natural gas futures for delivery in June traded at USD2.289 per million British thermal units during U.S. afternoon trade, soaring 4.71%.
It earlier fell by as much as 1.7% to trade at a session low of USD2.151 per million British thermal units.
Natural gas prices surged 7.1% last week, the largest weekly advance since late January. Prices have rallied almost 14% in the past six sessions leading up to Monday, since falling to a ten-year low of USD1.902 on April 19.
Sentiment on the heating fuel has improved in recent session after hitting a string of fresh 10-year lows as natural gas traders began to bet that prices near USD2.00 may result in production cuts.
A report from industry research group Baker Hughes Friday showed that that the number of active rigs drilling for natural gas in the U.S. fell by 18 last week to 613, the lowest since April 2002. The gas rig count is down by almost 35% since peaking at 936 in October.
The steady decline in rigs drilling for natural gas in the U.S. has fuelled speculation that major North American natural gas producers will begin to curb output in response to declining prices.
However, the rally prompted some investors to sell their position on profit taking and lock in gains, as traders remained concerned over elevated U.S. storage levels.
Weekly storage data from the U.S. released last week showed that natural gas storage in the U.S. rose by 47 billion cubic feet last week, the fifth consecutive seasonal injection of natural gas for the year.
Total U.S. natural gas storage stood at 2.548 trillion cubic feet as of last week, 52% above last year’s level and almost 56% higher than the five-year average for this time of year.
Market participants are weary to push prices higher amid worries U.S. gas supplies will reach total storage capacity by October.
Early injection estimates for Thursday’s storage data range from 25 billion cubic feet to 45 billion cubic feet, compared to last year's build of 60 billion cubic feet. The five-year average change for the week is an increase of 79 billion cubic feet.
Current inventories are at levels they did not reach last year until the end of June. Concerns are growing over whether enough capacity exists to store the fuel.
If weekly stock builds through October match the five-year average, inventories would top out at 4.594 trillion cubic feet, 12% over peak capacity estimates of about 4.1 trillion cubic feet.
Natural gas prices have plunged almost 15% since the beginning of March and are down nearly 26% since the start of 2012.
Elsewhere on the NYMEX, light sweet crude oil futures for delivery in June fell 0.12% to trade at USD104.81 a barrel.