Front month April natural gas futures on the New York Mercantile Exchange were at $2.534 per million British thermal units in early US activity, up 1.5 cents.
The front month fell in late January to $2.231, a contract low and the cheapest price for a front month since March 2002, forcing some producers to announce production cuts.
In the cash market, gas bound for the NYMEX delivery point Henry Hub in Louisiana was heard early near $2.44 on volume near 661 million cubic feet, flat to Tuesday's average.
Early Hub cash deals were also done at about an 11-cent disocunt to the front month contract, little changed from deals done late Tuesday at about a 13-cent discount.
But gas on the Transco pipeline at the New York City gate was heard early near $2.66 on volume near 131 mmcf, down 3 cents from Tuesday's average of $2.69.
STORAGE STILL A PROBLEM FOR BULLS
Last week's gas storage report from the US Energy Information Administration showed total domestic inventories fell by 166 billion cubic feet to 2.595 trillion cubic feet - still at record highs for this time of year, and 753 bcf, or 41 percent, above last year and 744 bcf, or 40 percent, above the five-year average level.
(Graphic: https://link.reuters.com/mup44s)
Despite a bigger-than-expected draw last week and some price gains this month, one of the mildest winters on record has slowed storage draws by about 510 bcf, or 29 percent, and left a huge cushion in inventories that could cap any more gains this year.
Last winter at this time, cold weather had forced storage owners to pull more than 2 tcf from inventory to help meet the surge in heating demand, but this season, only about 1.3 tcf of storage gas has been burned up, a 37 percent drop.
With extended forecasts still not showing any extreme cold on the horizon and winter winding down, traders said the huge surplus could pressure prices in late March if contractual obligations force utilities to cycle gas out of inventory to meet seasonal turnover requirements.
Early withdrawal estimates for this week's EIA report range from 82 bcf to 105 bcf, with most in the 90 bcf area versus last year's drop of 85 bcf and the five-year average decline for that week of 118 bcf.
A Reuters end-winter poll issued recently showed analysts expect stocks to end the heating season at an all-time high of 2.215 tcf, 43 percent above average and well above the previous record of 2.148 tcf set in 1983.
The inventory glut could also spell trouble for prices late in the summer stock-building season if inventory owners run out of room to store gas, forcing more supply into the market.
Estimates for US working gas storage capacity range from 4.1 tcf to 4.4 tcf, a level that could be tested if storage builds from April through October match last year's 2.2 tcf.
MORE FUNDAMENTALS
Temperatures in key gas-consuming cities were seen in the low-40s to the mid-50s Fahrenheit in New York and mostly the 40s F in Chicago for the next several days, according to the Weather Channel's weather.com.
The National Weather Service six- to 10-day outlook issued on Tuesday called for above-normal readings for about the eastern two-thirds of the nation, and normal or below-normal readings in the West.
About 18,300 megawatts, or 18 percent, of the nation's nuclear capacity was offline on Wednesday, up from about 10,000 MW out at this time last year and a five-year average outage rate of about 11,500 MW for this week.
Baker Hughes data last week showed the gas-directed rig count fell by six to 710, its lowest mark since October 2009. It was the seventh straight weekly decline and stirred more talk that low prices were finally forcing drillers to slow dry gas operations.
But many traders remain skeptical of announced production cuts, noting the planned reductions so far were not enough to tighten a market oversupplied by as much as 3 bcf per day, or more than 4 percent.
Analysts said the recent slowdown in drilling has yet to be reflected in pipeline flows. They noted that producers have shifted spending to higher-value oil and gas liquids plays which still produce plenty of associated gas that ends up in the market after processing.
Most analysts, noting it will be difficult to balance the gas market without serious production cuts, do not expect any major slowdown in gas output until late this year.