Natural-gas futures shed early losses and were trading modestly higher near $3 per million British thermal units after government data showed U.S. gas inventories rose less than expected last week. August gas futures were as much as 4.8 cents lower before the data, sliding from seven-month highs on Wednesday. The Energy Information Administration said at 10:30 a.m. EDT that gas storage rose by 28 billion cubic feet in the week ended July 13. That compared with expectations of a 33 bcf rise by analysts surveyed by Dow Jones Newswires and was below last year's increase of 67 bcf and the five-year average of 74 bcf for the week. Inventories stand at 3.163 trillion cubic feet, a record high for the week, and 19.2% above a year ago and 17.5% above the five-year average for the week. Prices flitted above $3/MMBtu, reaching a high of $3.032, but lost support after they couldn't break above $3.06/MMBtu, the intraday high set July 6. Gas futures haven't settled above $3/MMBtu since Jan. 9, remaining under pressure from high inventories and strong production levels. Natural-gas futures for August delivery on the New York Mercantile Exchange were trading down 0.1 cent at $2.971/MMBtu, swaying in and out of positive territory. "There's a real lack of impetus to really push through the $3 level," said Matt Smith, analyst at Summit Energy. Market participants noted near-term weather forecasts show above-normal temperatures lingering in the Midwest, but temperatures are seen returning to normal levels in the Northeast and parts of the West and South into early August, limiting potential for future demand-led gains in futures prices. Lofty prices near $3/MMBtu also raise potential for power generators to switch back to burning coal, which they were lured away from by gas prices that hit 10-year lows, selling as cheaply as $1.90/MMBtu in April. "When we get to these nosebleed heights, we see slowing of the switch to coal," said Mr. Smith. He noted that after prices hit $3.06/MMBtu on July 6, "they were abruptly slammed back down" to below $2.72 in recent days. Analysts said that with inventories at high levels, prices much above $3/MMBtu aren't justified without the potential of a tropical storm disrupting supply. Write to David Bird at david.bird@dowjones.com Subscribe to WSJ: http://online.wsj.com?mod=djnwires

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