Natural gas futures in New York advanced on speculation that the improving economy will lift demand for the power-plant and industrial fuel. Gas gained before a report today that may show U.S. manufacturing shrank in May at the slowest rate in eight months. Chinese factory output expanded for a third month in May, the official Purchasing Manager’s Index showed. “I see a lot of implications that the contraction might be slowing,” said Michael Fitzpatrick, a vice president for energy at MF Global Ltd. in New York. “Maybe there’s some investor feeling that they’re going to miss the boat. I fear that this optimism is misplaced.” Natural gas for July delivery climbed 23.9 cents, or 6.2, percent, to $4.074 per million British thermal units at 9:45 a.m. on the New York Mercantile Exchange. Prices are down 28 percent this year. Gas inventories increased 106 billion cubic feet in the week ended May 22 to 2.213 trillion cubic feet, the Energy Department said May 28. Analysts expected a rise of 111 billion. Supplies were 22 percent higher than the five-year average. Reduced exploration in the U.S. will cut natural-gas production this year by 1 percent, the Energy Department said in a report on May 12. There were 703 gas rigs operating in the U.S. last week, the lowest since Jan. 3, 2003, according to Baker Hughes Inc.

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