Natural gas traders are giving up on the idea that a sweltering summer will boost demand for the power-plant fuel and curb a massive US supply glut.

The spread between October and January gas futures — essentially a bet on how tight stockpiles will be heading into the northern hemisphere’s winter — has collapsed in recent weeks. By the end of October, inventories stored underground in depleted reservoirs, aquifers and salt caverns are expected to reach the highest since at least 2016, according to a government forecast.

US gas prices have staged a dramatic reversal after soaring to a 14-year high in 2022 amid geopolitical tensions. Stockpiles are now almost 20% above normal for this time of year following a mild winter that decimated consumption of heating fuel, while production remains high. Though extreme heat has lifted power demand, Hurricane Beryl knocked out a key export terminal in Texas, leaving more supply stranded in the US.

Gas futures for next-month delivery sank 7% to settle at $2.035 per million British thermal units on Wednesday. October futures slid 5.3%, while the January contract dropped 2.3%.

The outage at the Freeport liquefied natural gas terminal has dented consumption and US data continues to show larger-than-expected weekly additions to “already bloated inventories,” said Ryan McKay, a commodity strategist at TD Securities. “July forecasts of heat are still decent but appear to be easing at the end of month, meanwhile production has also held steady.”

Still, the market can be fickle, McKay said. And the US is forecasting prices, which have been unusually low, to rise again in the second half of the year.