UPDATE 3-US natgas futures end up 5 pct, 1st gain in 4 sessions

* Mostly mild weather ahead for consuming regions this week
* Production shut ins from storm Isaac nearly back to normal
* Coming up: EIA Short-term Energy Outlook on Tuesday

(Adds Gulf production shut-in data, analyst quote, updates
prices)
By Joe Silha
NEW YORK, Sept 10 (Reuters) - U.S. natural gas futures ended
higher on Monday for the first time in four sessions, driven by
technical buying after last week's slide and expectations for
another light weekly inventory build on Thursday.
Technical traders agreed the gas market became oversold last
week and was due for a bounce after closing lower in three
previous sessions and losing 4 percent for the week.
Traders also said Gulf of Mexico production shut-ins last
week from Hurricane Isaac of more than 11 billion cubic feet
could lead to another light, supportive weekly inventory build.
Front-month gas futures on the New York Mercantile
Exchange ended up 13 cents, or 4.8 percent, at $2.812 per
million British thermal units after trading between $2.647 and
$2.835. The gain, the largest one-day run in six weeks, more
than erased last week's loss.
"People are expecting a small storage injection this week,
but we're seeing a fall off in temperatures, which should lower
demand and limit the upside," said Jonathan Lee, an energy
procurement consultant at Ecova Inc. in Washington.
Production has been slow to return after Isaac, which hit
the Gulf about two weeks ago, but just 6 percent, or 275 million
cubic feet, of offshore output remained shut as of Monday, a
government report showed.
Despite today's gains, many traders remain skeptical of the
upside with inventories still at record highs for this time of
year and production flowing at or near an all-time peak.
After a cool start to the week, AccuWeather.com expects
temperatures in the Northeast and Midwest, key gas consuming
regions, to climb to slightly above normal by midweek, but
traders said readings were not likely to be warm enough to
generate much air conditioning demand.
Ecova's Lee also said that additional nuclear plant outages
this week may also have propped up prices.
On the nuclear front, outages on Monday totaled 9,300
megawatts, or 9 percent of U.S. capacity, up from 6,900 MW out
on Friday and 6,900 MW for the five-year average, but down from
9,900 MW out a year ago.

RIGS DECLINE, PRODUCTION REMAINS HIGH
Data from Baker Hughes on Friday showed the gas-directed rig
count fell 21 last week to a 13-year low of 452.
The 52-percent drop in gas-directed drilling over the last
11 months has fed expectations that producers were getting
serious about stemming the flood of record supplies. But so far
there is little evidence that gas output is slowing.
(Rig graphic: r.reuters.com/dyb62s )
Dry gas drilling may be largely uneconomical at current
prices, but the associated gas produced from more profitable
shale oil and shale gas liquids wells is likely to keep gas
production at a record high for a second straight year.
Traders were waiting for the U.S. Energy Information
Administration's Short-term Energy Outlook on Tuesday, with
updated forecasts on supply, demand and inventories.
Domestic gas production in 2012 has been running about 3
billion cubic feet per day, or 4 percent, more than last year's
record high.

STORAGE STILL HIGH
Last week's storage report from the U.S. Energy Information
Administration showed that gas inventories for the week ended
Aug. 31 climbed to 3.402 trillion cubic feet, still a record
high for this time of year.
(Storage graphic: link.reuters.com/mup44s)
A huge inventory surplus, which peaked in late March at
nearly 900 bcf above a year earlier, has been cut by 55 percent
as record heat this summer slowed weekly builds.
But at 83 percent full, stocks are at levels not normally
reached until the first week of October and offer a huge cushion
that can help offset any weather-related spikes in demand or
Gulf Coast supply disruptions from storms.
With summer heat winding down, concerns remain that the
storage overhang could drive prices to new lows this autumn if
inventories test the government's 4.1-tcf estimate of capacity.
Early injection estimates for Thursday's EIA report range
from 22 bcf to 55 bcf, well below the year-earlier build of 80
bcf and the five-year average increase for that week of 72 bcf.

(Additional reporting by Eileen Houlihan; Editing by Bob
Burgdorfer and M.D. Golan)