Natural-gas futures fell Wednesday as traders bet moderating weather would lower demand for the fuel and as the market looked ahead to weekly inventory data.

Natural gas for July delivery settled down 14.6 cents, or 3.4%, at $4.217 a million British thermal units on the New York Mercantile Exchange.

Forecasts for warmer temperatures contributed to gains made in the previous session, but more recent forecasts show the weather wouldn't be as hot as initially expected, which is likely to curb demand for natural gas used to generate electricity to power air-conditioning.

"Impetus behind the selling appeared to be some shifts in temperature views suggestive of more moderate patterns than had been anticipated earlier this week," analysts from Ritterbusch & Associates said in a note.

The highest temperatures in the six- to 10-day forecast are expected in Texas and the Southern Plains, forecaster MDA EarthSat said. Above-normal temperatures are still expected in the 11- to 15-day forecast, with highs in the lower 100s in parts of Texas and Oklahoma.

The majority of the U.S. will see seasonal to above-normal temperatures, but there is still a slight chance that temperatures will turn cooler than normal across the Midwest and East Coast in the 11- to 15-day forecast, investment bank Macquarie said.

Trading remained in the $4.20 to $4.40 range seen in the past week, with futures falling as low as $4.214/MMBtu during the session.

The market's enthusiasm has damped a bit since the long holiday and is again testing $4.20, said Jay Levine, president of Enerjay LLC.

"We're coming back now and retesting that. Whether we come down and trade closer to $4 is to be seen," he said.

The market has been volatile, with reversals recently where futures dropped below the previous low and settled above the previous day's high, said Peter Beutel, president of Cameron Hanover.

"We get these waves of buying and selling," Beutel said, noting that market is divided with swap dealers holding most long positions and producers and managed money holding short positions.

The Energy Information Administration's natural-gas inventory report is scheduled to be released Thursday at 10:30 a.m. EDT.

In a Dow Jones Newswires survey analysts and traders said they expect the EIA to report that 81 billion cubic feet of gas was added to storage during the week ended July 1. That result would exceed last year's 76-bcf storage build as well as the five-year average injection of 80 bcf.

Injections that exceed expectations typically push prices lower while those below predictions often lift prices. Last week futures rose as the EIA reported a lower-than-expected 78 bcf build.

Meanwhile, there is a 10% chance that a weather system in the southeastern Gulf of Mexico could become a tropical cyclone in the next 48 hours, the National Hurricane Center said Wednesday afternoon.

Tropical storms and hurricanes can hamper natural-gas production in the Gulf of Mexico.