On the New York Mercantile Exchange, natural gas futures for delivery in October traded at USD2.715 per million British thermal units during U.S. morning trade, gaining 1.1%.
It earlier fell by as much as 1.1% to trade at a session low of USD2.655 per million British thermal units. Prices hit USD2.611 per million British thermal units on Wednesday, the lowest since June 22.
The October contract traded at USD2.686 prior to the release of the U.S. Energy Information Administration report.
The U.S. Energy Information Administration said in its weekly report that natural gas storage in the U.S. in the week ended August 24 rose by 66 billion cubic feet, just above market expectations for an increase of 63 billion cubic feet.
Inventories rose by 60 billion cubic feet in the same week a year earlier, while the five-year average change for the week is an increase of 62 billion cubic feet, according to U.S. Energy Department data.
Total U.S. natural gas storage stood at 3.374 trillion cubic feet as of last week. Stocks were 429 billion cubic feet higher than last year at this time and 361 billion cubic feet above the five-year average of 3.013 trillion cubic feet for this time of year.
Inventory didn't top the 3.3-trillion cubic feet level in 2011 until the end of September, with stocks peaking at a record 3.852 trillion cubic feet in November of last year.
The report showed that in the East Region, stocks were 109 billion cubic feet above the five-year average, following a net injection of 47 billion cubic feet.
Stocks in the Producing Region were 189 billion cubic feet above the five-year average of 935 billion cubic feet, after a net injection of 16 billion cubic feet.
Market analysts have warned that without strong demand through the rest of the summer cooling season, gas inventories will reach the limits of available capacity later this year.
The storage surplus to last year will have to be cut by at least another 150 billion cubic feet in the 14 weeks left before winter withdrawals begin to avoid breaching the government's 4.1 trillion cubic feet estimate of total capacity.
A bout of extreme heat across much of the U.S. over the past two months helped boost natural gas prices above the key USD3.00-level in recent weeks. Prices rallied to a 2012 high of USD3.275 per million British thermal units on July 31.
But futures have come under heavy selling pressure since the start of August, losing almost 17% after extended weather forecasts pointed to milder weather across most parts of the U.S.
Meanwhile, the U.S. National Hurricane Center downgraded Isaac to a tropical storm from a Category 1 hurricane, after it made landfall in southern Louisiana on Wednesday.
The agency said that the storm was likely to weaken further in the next 48 hours.
The news eased concerns over a disruption to supplies from the Gulf, as the storm spared most oil and natural gas production facilities from significant damage.
Energy traders track tropical weather in the Gulf of Mexico, with prices typically spiking in the event it disrupts production. However, offshore Gulf of Mexico gas output plays a much smaller role in supplying the U.S. than in recent years.
Production in federal waters in the Gulf currently accounts for only 7% of natural gas output, down significantly from 17% in 2005.
The U.S. Atlantic hurricane season began on June 1 and ends November 30.
Elsewhere on the NYMEX, light sweet crude oil futures for delivery in October dropped 1.3% to trade at USD94.27 a barrel, while heating oil for October delivery added 0.3% to trade at USD3.131 per gallon.
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