NEW YORK (Dow Jones)--Natural gas futures finished more than 4% higher Thursday, propelled by government data showing smaller-than-expected build in U.S. gas inventories for last week.

Natural gas for May delivery on the New York Mercantile Exchange settled 17.3 cents higher, or 4.37%, at $4.128 a million British thermal units after reaching a high of $4.15/MMBtu earlier in the day.

Futures climbed Thursday after the U.S. Energy Information Administration reported an injection into gas storage of 73 billion cubic feet for the week ended April 16, below the 79 bcf analysts and traders had predicted in a Dow Jones Newswires survey. Mild weather and robust supplies last week had some traders betting that a usually large build in storage would send prices tumbling after the data was released. Those traders rushed to cover their positions when the EIA report revealed a more modest build than the market had forecast.

Money managers and noncommercial traders have been betting heavily on falling gas prices over the past several months, creating market volatility when storage data or other developments force traders to cover short positions.

"As long as the funds maintain a historically large short holding, sessions such as today's will develop in which a seemingly modest supportive development quickly translates to a quick 5% price advance," wrote Jim Ritterbusch, the president of Ritterbusch & Associates, a Galena, Ill. energy advisory firm, in a note to clients Thursday.

Moderate spring temperatures and intense drilling activity in onshore fields continued to place downward pressure on the gas market, however. Commodity Weather Group, a Bethesda, Md. private forecaster, was predicting normal or above-normal temperatures across the eastern U.S. from April 27 through May 6. The temperate weather was expected to curb the demand for natural gas for heating and cooling.

Meanwhile, gas producers continue to drill despite low prices, leading to sizable injections of gas into storage each week. Improved technology has led to a glut of gas supply from onshore shale-rock formations, and many shale-gas leases require producers to drill within a certain time frame to keep the acreage.

Total gas in storage is 1.829 trillion cubic feet, 18.5% above the five-year average and 5.5% above last year's level as of April 16.

"I need to see what happens with prices tomorrow before I'll believe that this 'rally' is real," said Jay Levine, the president of Enerjay LLC, a Portland, Maine energy brokerage. "We need another close about $4 if this market is going to move higher."

-By Christine Buurma, Dow Jones Newswires; 212-416-2143;