HOUSTON (Dow Jones)--Natural gas futures fluctuated as relatively high inventories of the fuel weigh on prices, despite anticipation of increased summer demand.

Natural gas for June delivery on the New York Mercantile Exchange recently traded 2.9 cents, or 0.72%, lower at $4.006 a million British thermal units. The front month contract dipped below the $4 mark during the session and climbed as high as $4.06/MMBtu in earlier, choppy trading.

Natural gas prices are facing pressure from rising gas inventories and increased drilling activity, indicating that gas supplies remain robust. At the same time, traders, who had bet on falling prices, are buying back previously sold contracts and booking profits ahead of the summer -- when gas demand for electricity generation climbs and hurricanes can potentially disrupt supplies.

"We are basically hugging $4 right now," Gene McGillian, an analyst with Tradition Energy in Stamford, Conn., said, noting that the fundamentals of supply and demand are "pretty weak."

Natural gas in U.S. storage for the week ended May 14 stood at 2.165 trillion cubic feet -- 3.5% higher than last year and 16.6% above the five-year average. Those high levels of gas in storage can ease concerns about short-lived supply interruptions or demand spikes.

Drilling activity is also on the rise. The number of rigs drilling for natural gas climbed to 969 last week, an increase of 18 rigs from the previous week, according to oilfield services provider Baker Hughes Inc.

The jump in the rig count has "suggested to traders that the lower prices seen in recent months are not low enough to give us a pullback in drilling," analysts with the energy advisory firm Cameron Hanover wrote in a note to clients on Monday.

Worries over euro-zone debt problems have also battered equity and energy markets, sending investors in search of less risky assets. The natural gas market will sometimes take cues from crude oil and other markets, which can act as bellwethers for the economy and overall energy demand.

"Add to the poor fundamentals the effect that the spreading European contagion may have on industrial demand and gas prices may be heading for recent lows, very soon," Mike Fitzpatrick, an analyst with MF Global in New York wrote in a note to clients.


-By Jason Womack, Dow Jones Newswires; 713-547-9201; jason.womack@dowjones.com