US gas futures edge lower as mild weather, economic news weigh

* Front month well below recent 7-1/2-month high
* Milder weather on tap for consuming regions
* Stir in tropical activity has some traders cautious
* Coming Up: EIA oil data Wednesday, EIA gas data Thursday

By Eileen Houlihan
NEW YORK, Aug 15 (Reuters) - U.S. natural gas futures fell
about 1 percent in early trading Wednesday, again pressured by
milder weather on tap for consuming regions of the nation that
should curb late-summer cooling demand.
In addition, some sour economic news early weighed on most
markets, but some traders said a stir in tropical activity,
recent unplanned nuclear outages and a test and hold of chart
support could limit further losses.
Technical traders said the market had been due for a bounce
after sliding about 15 percent early this month as blazing
summer heat subsided.
But most expect prices to have a hard time breaking back
above $3 per million British thermal units, the level where gas
tends to lose much of its appeal over coal for power generation.
As of 9:21 a.m. EDT (1321 GMT), front-month September
natural gas futures on the New York Mercantile Exchange
were at $2.807 per mmBtu, down 2.7 cents, or about 1 percent.
The nearby contract rose as high as $3.277 in late July, its
highest mark since December.
The National Weather Service's six- to 10-day outlook issued
on Tuesday again called for below-normal temperatures across
much of the eastern half of the nation through the mid-continent
and on the West Coast, and above-normal readings for the
remainder of the West and in northern New England.
The National Hurricane Center said the remnants of Tropical
Depression Seven had a near zero chance to regenerate over
Honduras and Belize. A low pressure system over the Central
Atlantic, however, had an 80 percent chance to develop further
in the next 48 hours.
On the nuclear front, the U.S. NRC had not yet updated
outage information for Wednesday.
On Tuesday total outages were at 9,000 megawatts, or 9
percent of U.S. capacity, up from 8,900 MW out on Monday, 6,200
MW out a year ago, and a five-year outage rate of about 5,600
MW.

ANOTHER BELOW-AVERAGE STOCK BUILD
Last week's gas storage report from the U.S. Energy
Information Administration showed domestic gas inventories had
risen by 24 billion cubic feet to 3.241 trillion cubic feet.

The build came in below Reuters poll estimates for a 30-bcf
build and again was well short of the year-earlier gain of 31
bcf and the five-year average increase for the week of 45 bcf.
It was the 15th straight week injections have fallen below the
seasonal norm.
The weekly injection trimmed the surplus to last year to 465
bcf, or 17 percent. It also cut the excess versus the five-year
average to 386 bcf, or 14 percent.
(Storage graphic: link.reuters.com/mup44s)
But storage remains at record highs for this time of year
and at 79 percent full, a level not normally reached until
mid-September. Producing-region stocks, which lost 6 bcf last
week, are at 83 percent of estimated capacity.
Concerns remain that the storage overhang could drive prices
to new lows later this summer if inventories climb to levels
that would test the government's 4.1-tcf estimate of capacity.
The EIA estimates that gas inventories will climb to 3.954
tcf by the end of October.
Early injection estimates for this week's EIA report range
from 14 bcf to 32 bcf, versus last year's build of 43 bcf and
the five-year average increase for the week of 43 bcf.

HIGH PRODUCTION
Baker Hughes drilling rig data on Friday showed the
gas-directed rig count fell for the 11th time in 12 weeks to a
13-year low of 495.
(Rig graphic: r.reuters.com/dyb62s)
Dry gas drilling has become largely uneconomical at current
prices, and a 47 percent drop in the gas rig count over the last
nine months has fed expectations that producers were getting
serious about slowing record output.
But drillers have moved rigs to more-profitable shale oil
and shale gas liquid plays that still produce plenty of
associated gas that ends up in the market after processing.
The EIA's gross gas production report last week showed May
output was unchanged from April at 72.39 bcf per day, just shy
of January's record of 72.74 bcfd.
Traders have been looking for signs that relatively low gas
prices might finally slow record output, but production is still
at 3 bcfd, or 4.3 percent, above the same year-ago month.
The EIA, in its short-term energy outlook last week, trimmed
its estimate for domestic gas production growth in 2012, but
still expects output this year to be up 3.8 percent from 2011's
record levels.
The agency said it expected marketed natural gas production
in 2012 to rise by 2.5 bcf per day to a record 68.72 bcfd, down
slightly from its July outlook that had output this year at
68.98 bcf daily.

(Reporting by Eileen Houlihan)