HOUSTON (Dow Jones)--Natural gas futures ended slightly lower Monday as ample supplies of the fuel and increased drilling activity put pressure on prices.

Natural gas for June delivery on the New York Mercantile Exchange settled 1.8 cents, or 0.45%, lower at $4.017 a million British thermal units. The front-month contact remained confined to a narrow eight-cent trading range during the session and finished above $4/MMBtu as bargain buying helped bolster prices.

Natural gas prices have lost about a third of their value since hitting highs in January of about $6/MMBtu. Prices sank as heating demand faded and producers ramped up drilling in prolific onshore natural gas fields known as shales. The downturn in prices has provided opportunities for traders, who had bet on falling prices, to buy back contracts and book profits ahead of summer--which brings increased demand for gas for electricity generation and the threat of supply disruptions from hurricanes.

Kent Bayazitoglu, an analyst with Houston-based Gelber & Associates, said that natural gas futures have been drawn to a "$4 magnet," noting that prices below $4 spur bargain hunting and advances above that $4 price level are being limited by ample gas supplies.

The natural gas rig count climbed to 969 last week, an increase of 18 rigs from the previous week, according to oilfield-services provider Baker Hughes Inc (BHI). The jump in the rig count nearly erasing the rig-count declines in April and May.

"The propensity of drilling activity to maintain an upward path in the face of $4 handle pricing is being widely accepted as a major impediment to a sustained price advance," Jim Ritterbusch, president of the energy advisory firm Ritterbusch and Associates, wrote in a note to clients.

Producers, who have locked in prices on future output, are continuing to drill to establish production and secure leases in emerging shale-gas fields. At the same time natural gas inventories have swelled.

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.

Meanwhile, weather forecasts are calling for warmer-than-normal temperatures across the Midwest and Northeast this week. Those temperatures are expected to bring additional gas demand to generate electricity for air conditioners. However, the Midwest and the Northeast are expected to gradually cool down next week, said Jim Rouiller, senior energy meteorologist with private forecasting firm Planalytics.

"This is not a prolonged heating event," Rouiller said.


FUTURES                            SETTLEMENT                       NET CHANGE
Nymex Jun                                 $4.017                                          -1.8c
Nymex Jul                                  $4.075                                          -3.1c
Nymex Aug                               $4.146                                          -3.2c

CASH HUB                           RANGE                                PREVIOUS DAY
Henry Hub                           $4.03-$4.12                                  $4.07-$4.17
Transco 65                          $4.07-$4.10                                   $4.11-$4.18
Tex East M3                        $4.40-$4.58                                  $4.39-$4.49
Transco Z6                          $4.45-$4.57                                  $4.41-$4.50
SoCal                                  $3.82-$3.90                                  $3.71-$3.90
El Paso Perm                      $3.77-$3.90                                   $3.80-$3.89
El Paso SJ                          $3.67-$3.73                                   $3.61-$3.73
Waha                                 $3.88-$3.95                                   $3.90-$3.96
Katy                                  $3.99-$4.07                                    $4.00-$4.13

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