Natural gas futures regained some of Tuesday's steep losses, bouncing back from a fall prompted by disappointing industrial production data.
Natural gas for June delivery recently traded up 3.1 cents, or 0.74%, at $4.213 a million British thermal units on the New York Mercantile Exchange.
The benchmark contract lost 13.2 cents Tuesday when the Federal Reserve said industries used 76.9% of their capacity last month, down 0.1 percentage point from the revised 77% March figure. Manufacturing capacity utilization dropped 0.4 percentage point to 74.4%.
It was the first decline in nearly a year for industrial activity, which accounts for one-third of U.S. natural-gas demand.
The market's reaction to such data is usually muted, but with little weather-related news to move on, the Federal Reserve report was "hard to ignore," said Jim Ritterbusch, who heads Illinois trading advisory firm Ritterbusch & Associates.
"With natural gas production still on the uptrend, this market will likely be reliant upon further demand gains from the industrial sector if any price advances are to be sustained through the balance of the spring," Ritterbusch wrote in a client note.
The U.S. Energy Information Administration recently predicted that production levels will remain high throughout the spring season, during which gas is injected into storage, and that milder weather milder last summer will prevent much of it from being burned to power air conditioning. The result, the agency said, will likely be record stockpiles of natural gas this fall.
In the near-term, forecasters are predicting mild weather, which should lead to large injections into storage during the next few weeks.
Meteorologists with private forecaster Commodity Weather Group predict cool temperatures will replace the current warmer-than-normal weather in the Midwest next week and push toward the East Coast.
"The market seems to have become more comfortable with the forecast of much-below-normal weather for the next five days and was not impressed by normal to above-normal weather predictions in the next 6-15 day period across much of the United States," analysts with Barclays Capital wrote in a client note.
Meanwhile, natural gas for next-day delivery at the benchmark Henry Hub in Louisiana recently traded at $4.16/MMBtu, according to IntercontinentalExchange, down 8.6 cents from Tuesday's average. Natural gas for Wednesday delivery at Transcontinental Zone 6 in New York traded at $4.44/MMBtu, down 9.5 cents from Tuesday.
-Dan Strumpf contributed to this article.