--Gas rallies for second session ahead of inventory report --May contract expires at session close --Power-generation demand on rise By Dan Strumpf Of DOW JONES NEWSWIRES NEW YORK (Dow Jones)--Natural-gas futures climbed for the second straight session Thursday ahead of a government report expected to show a smaller-than-normal increase in U.S. gas stockpiles. The report could signal that natural-gas demand--which has been weak for months--has finally gotten a boost, in part from a bout of cool weather that has swept the East Coast. Some market observers say that gas prices may finally have found a bottom after spending most of 2012 plumbing 10-year lows. "Sooner or later, we were bound to get some kind of short-covering rally," said Tom Saal, senior vice president of energy trading at INTL Hencorp Futures, referring to the purchase contracts to close out bets on falling prices. Natural gas for May delivery recently rose 4.3 cents, or 2.1%, to $2.111 a million British thermal units on the New York Mercantile Exchange. With the contract due to expire at the close of trading Thursday, the more actively traded June contract recently gained 5.2 cents, or 2.4%, to $2.222/MMBtu. The Department of Energy's weekly inventory report is expected to show an injection of 45 billion cubic feet of gas to storage during the week ended April 20, according to a survey of analysts and traders by Dow Jones Newswires. That is just below the five-year-average build of 47 billion cubic feet for that week. Still, natural-gas inventories still stand at their highest level ever for this time of year, following a mild winter that squelched demand for natural gas used for heating and relentless production of gas from shale fields. If the storage survey is correct, inventories as of April 20 would stand at 2.557 trillion cubic feet, about 56% above the five-year average for the week and 53% above last year's level. Over the last week, a blast of cooler temperatures across the U.S. Northeast has prompted an increase in demand for natural gas used for heating and helped fuel a price rally. Last weekend's nor'easter brought snow to some parts of the region, which had been scarce all winter. Some analysts said that prices may finally be due for a rally, as the slide in prices begins to undermine the economics of continued production and spur demand from other quarters, such as power generation. On Wednesday, Southern Co. (SO) said it is boosting the amount of gas it burns this year to generate electricity due to the slide in price. The utility giant said its 2012 energy mix will be 47% fueled by gas and 35% fueled by coal. In 2007, it was 70% fueled by coal and just 16% fueled by gas. -By Dan Strumpf, Dow Jones Newswires; 212-416-2818; dan.strumpf@dowjones.com.

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