NEW YORK (Dow Jones)--Natural gas futures finished lower Friday, driven by oversupply concerns and mild weather.

Natural gas for June delivery on the New York Mercantile Exchange settled 6 cents, or 1.51%, lower at $3.92 a million British thermal units after reaching a low of $3.885/MMBtu earlier in the day.

An abundance of gas supply continued to send gas prices lower Friday, with the market extending losses after Thursday's steep decline. Government inventory data released Thursday showed a larger-than-expected build in U.S. gas stocks, while a production report showed that supplies are still rising despite low prices.

"You just have to go back to the massive, massive build," said Rich Ilczyszyn, an analyst with Lind-Waldock in Chicago. "We can't sustain the $4 level."

Total gas in U.S. storage as of April 23 was 1.912 trillion cubic feet, 18.8% above the five-year average and 5.6% above last year's level.

Data released Friday by oil-field services company Baker Hughes Inc. (BHI) showed that the number of rigs drilling for gas in the U.S. this week was 958, an increase of two rigs from last week. Gas producers have continued to ramp up output despite tumbling prices, leading to surging supplies of gas from onshore rock formations known as shales. Leases of shale-gas acreage often require companies to drill within a certain period, regardless of price levels.

Meanwhile, mild spring weather continues to stifle gas demand for heating and cooling. Commodity Weather Group, a Bethesda, Md., private forecaster, was predicting mostly normal and above-normal temperatures across the continental U.S. from May 5 to May 14, with some cooler-than-normal temperatures in the northern tier of the country.


-By Christine Buurma, Dow Jones Newswires; 212-416-2143; christine.buurma@dowjones.com