(Bloomberg) — Natural gas futures soared to $4 per million British thermal units in the U.S. for the first time since December 2018 as summer heat intensified concerns about tight supplies later this year.

Gas for August delivery settled at $4.003, the highest closing price in 31 months. The premium for March 2022 gas over April futures — essentially a bet on how undersupplied the market will be at the end of next winter — reached 62.9 cents, hovering near a record high.

Prices for the fuel are soaring across the globe as scorching weather stokes demand for electricity to run air conditioners. In the U.S., however, the rally is also underpinned by concern about a potential supply shortfall in the winter, when gas consumption peaks as homes and businesses crank up the heat. Stockpiles are already below normal for the time of year, and production growth has been restrained as drillers heed investor calls for capital discipline.

“You generally have a heat situation that justifies this kind of rally. It’s largely a function of the weather, and it’s not going to go away,” Bob Yawger, director of the futures division at Mizuho Securities, said in an interview. “We haven’t seen this kind of heat in a long time.”

Intense summer heat could push power demand in Texas to near-record levels next week, but the state’s grid operator says it has more than enough electricity to keep blackouts at bay. Temperatures are expected to soar to 101 Fahrenheit (38 Celsius) in Dallas as soon as Monday, the National Weather Service said, breaking the 100-degree mark for the first time this year.

Exports are also contributing to tight gas supplies. In May, the U.S. shipments of liquefied natural gas exceeded Australia’s for the first time ever as buyers around the world continued to purchase record amounts of the super-chilled fuel. The next month, gas deliveries to Mexico from the U.S. via pipeline also reached an all-time high.

U.S. gas in underground storage is 6.2% below normal for the time of year, government data show.

The market is on pace to go into the winter with “the least amount of gas in storage we’ve had on hand in years,” said John Kilduff, founding partner at hedge fund Again Capital LLC.

–With assistance from David R. Baker, Brian K. Sullivan and Cameron Minnard.

© 2021 Bloomberg L.P.

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