Natural gas fell Wednesday as traders sold off contracts to lock in profits ahead of this week's inventory report from the Energy Information Administration. Natural-gas futures for August delivery on the New York Mercantile Exchange were recently trading down 3.7 cents, or 1.2%, at $3.150/mmBtu. Futures hit a 2012 settlement high Tuesday amid a five-day rally, as extreme heat around the nation boosted expectations that high demand for gas-powered electricity will continue. With prices at their highest levels since December, traders are pausing ahead of the weekly storage inventory report. The data, to be released Thursday, will show whether increased need for natural gas is eating away at the natural gas oversupply. "Given the recent run-up, it's really just a bit of profit taking," said Matt Smith, an analyst at Summit Energy. "A bit of calm before the storm." Forecasts for hotter-than-normal temperatures across the nation are mostly unchanged for the next two weeks. "The core heat remains focused from the Central Plains to Midwest, where extreme drought conditions will continue to enhance heating," said private forecaster MDA EarthSat. The expectation of continued heat has alleviated concerns that the natural gas supply overhang will exceed total storage capacity, estimated at 4.1 trillion cubic feet, later this year. This summer's hot weather has lowered the current total supply of natural gas to just 17.5% above the five-year average for this time of year, a significant reduction from when total supply was 60% above the five-year average in March. With storage capacity no longer the biggest worry, weather is the biggest factor driving the market in the short term, said Jim Ritterbusch of trading advisor Ritterbusch & Associates in a note to clients. Natural gas for next-day delivery at the benchmark Henry Hub in Louisiana recently traded at $3.11/mmBtu, according to IntercontinentalExchange, compared with Tuesday's average of $3.1637/mmBtu. Natural gas for next-day delivery at Transcontinental Zone 6 in New York traded at $3.4850/mmBtu, up from $3.3689/mmBtu. Write to Nicole Friedman at nicole.friedman@dowjones.com Subscribe to WSJ: http://online.wsj.com?mod=djnwires

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