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Natural gas flares are seen at an oil pump site outside of Williston, North Dakota March 11, 2013.Shannon Stapleton/Reuters

Natural gas is the bull market everyone but energy geeks seems to be missing.

Since the end of May, prices in Canada and the United States have surged with demand, and some analysts believe that inventories could be winnowed down in the coming months to levels resulting in much richer markets this winter.

That would spell a big shift from the past two years, when consumers enjoyed a break in heating costs because of record-high stockpiles. One big unknown is: At what price do gas producers increase drilling to the point where supplies are quickly replenished?

Early this month, gas futures on the New York Mercantile Exchange settled just below $3 (U.S.) per million British thermal units for the first time in more than a year. They have taken a breather, with the August contract settling for $2.72 per MMBtu on Monday. Still, that's 65 per cent above the price in late May, with strong demand for air conditioning owing to U.S. summer heat.

Canadian prices have also jumped, largely because oil sands projects in Alberta – which are major gas consumers – have increased operations following the wildfires in the Fort McMurray region that forced extensive outages.

Alberta spot natural gas sold for $2.33 (Canadian) per gigajoule on Monday, up 94 per cent from late May, according to the NGX electronic exchange.

"I have no reason in general not to be bullish on gas, especially looking at the U.S. side of the equation," said Martin King, analyst at FirstEnergy Capital Corp. "It's gone sideways this past week, but it's still probably outperforming a lot of people's guesses by 30 or 40 cents."

Oil has dominated the energy conversation as the global downturn has dragged on, pulling prices to $26 (U.S.) a barrel from more than $100 in 2014, owing to slowing economies and oversupplies of crude. Meanwhile, the massive change in the North American gas market brought about by the shale revolution, coupled with some mild winters, had meant weak gas pricing and reduced interest.

"The way I see it, we're going to be running into a major structural deficit in supply during the winter, and I see very few people talking about this. I just don't think people's head space is there quite yet," Mr. King said.

Inventories in the United States are still above last year's levels and the five-year average, but forecasts calling for more hot weather in major markets such as the U.S. Midwest and Northeast, as well as Southern Ontario, will quickly cut the surplus, Raymond James analyst Jeremy McCrea said.

Indeed, in March, the volume of gas in U.S. storage facilities was more than one trillion cubic feet above year-earlier supplies.

As of the latest weekly U.S. Energy Information Administration report, it has been reduced to about 500 billion cubic feet.

Demand from U.S. power generators has increased in the past week after a brief cooldown, pointing to the likelihood of a large draw on inventories in this week's data, Mr. McCrea said.

"As gas supply continues to trend lower than last year and storage levels improve, speculation on winter weather has begun to put a bid back into NYMEX and [Alberta] prices," he said.

There are also longer-term fundamentals that stand to drive prices higher this winter, much to the relief of producers and the Alberta government, which is struggling with a massive budget deficit because of the collapse in energy revenue.

One factor is that U.S. production has yet to respond to higher prices.

Output from the Marcellus shale deposit in the U.S. Northeast has been expected to rebound quickly as drilling becomes more profitable, Mr. King said. There is not evidence of that yet.

Meanwhile, demand is on the rise owing to increasing exports to Mexico from the United States, and with the recently started liquefied natural gas project in Sabine Pass, La.

Shipments from the site started early this year and a second phase is due to start up this year.

"If we get a colder-than-normal winter, or even a normal winter, we're going to eat through a lot of gas in storage, and that doesn't seem to be capturing a lot of headlines yet," Mr. King said.