UPDATE 3-U.S. natgas futures end down, first loss in 3 sessions

* Weather weakens front futures, widens spreads to winter
* High nuclear plant outages help limit downside
* Storage builds seen picking up in coming weeks

(Changes byline; adds analyst quote, spread data; updates
prices)
By Joe Silha
NEW YORK, Sept 24 (Reuters) - U.S. natural gas futures ended
lower on Monday for the first time in three sessions, as record
high supplies, mild weather forecasts and slowing demand weighed
on prices.
Many traders remain skeptical of any upside until cooler
temperatures arrive to stir more heating load, particularly with
storage and production still running at or near record highs.
"I think we're in a sideways pattern until we get the next
storage report. There's not much heating or cooling demand
around right now," said Steve Mosley at SMC Advisory Services.
Front-month gas futures on the New York Mercantile
Exchange ended down 4.8 cents, or 1.7 percent, at $2.837 per
million British thermal units after trading between $2.814 and
$2.903. The near contract had gained 4.5 percent in the previous
two sessions, but posted a 2 percent net loss last week.
While nuclear plant outages, running about 6,000 megawatts
above year-ago could give gas demand from electric utilities a
boost - gas-fired units usually replace any lost generation -
traders noted overall power loads have slowed as milder
late-summer weather curbs air-conditioning use.
Forecaster MDA EarthSat expects temperatures for the eastern
half of the nation to range from normal to above normal for at
least the next two weeks. Traders said readings in the high 60s
and 70s Fahrenheit were not likely to generate much load.
In addition, Central Appalachian coal prices recently have
been hovering near two-year lows, sinking to the gas price
equivalent of just above $2 per mmBtu.
That has stirred concerns that some utilities that have been
burning cheaper gas to generate power could switch back to coal.
Loss of that demand, which helped prop up gas prices all summer,
could force more gas into a well-supplied market.
Most analysts agree gas prices need to stay well below $3
this autumn in order to underpin switching demand.
Relative weakness in front-month futures widened spreads to
winter months, with the January premium to October gaining 2.3
cents to close at 64.7 cents, its widest in 10 weeks. That
spread has shot up more than 40 percent since settling at 45.8
cents two weeks ago, its narrowest since June 2011.
Technical traders said the market seemed to be trapped in a
range between $2.70 and $3, waiting for a reason to break out.

RIGS GAIN, PRODUCTION STILL HIGH
Data from Baker Hughes on Friday showed that the
gas-directed rig count rose by six last week to 454 after
slipping the prior week to a 13-year low. It was the first gain
in the gas rig count in four weeks and only the seventh increase
this year.
(Rig graphic: r.reuters.com/dyb62s )
The nearly steady decline in gas-directed drilling over the
last 11 months has raised expectations that producers were
finally taking steps to stem the flood of record supplies.
But so far, production shows few signs of slowing.
While dry gas drilling has become largely uneconomical at
current prices, gas produced from more profitable shale oil and
shale gas liquids wells has kept output stubbornly high.
The Energy Information Administration expects marketed gas
production in 2012 to hit a record for a second straight year,
rising 4 percent from 2011 levels to 68.86 bcf per day.

STORAGE BUILDS PICK UP, SURPLUS SHRINKS
Data last week from the U.S. Energy Information
Administration showed that gas inventories for the week ended
Sept. 14 rose by 67 billion cubic feet to 3.496 trillion cubic
feet, a record high for this time of year.
It was the largest weekly build in more than three months
and the third largest so far in an injection season that began a
bit early this year in mid-March.
(Storage graphic: link.reuters.com/mup44s)
While record heat this summer helped cut a huge storage
surplus relative to last year by some 64 percent from its
late-March high near 900 bcf, traders noted storage builds in
autumn are likely to pick up as weather loads fade.
At 82 percent full, total stocks are hovering at levels not
normally reached until the second week of October and still
offer a huge cushion that can help offset any weather-related
spikes in demand or supply disruptions from storms.
Early injection estimates for Thursday's EIA report range
from 69 bcf to 83 bcf versus a year-earlier build of 104 bcf and
the five-year average increase for the week of 76 bcf.

(Additional reporting by Eileen Houlihan. Editing by Andre
Grenon)