U.S. natgas futures seesaw early, hover near 2012 high

* Front month near Thursday's highest mark this year
* High nuclear plant outages boost near-term demand
* Mild autumn weather could limit more gains
* Coming up: Baker Hughes gas drilling rig data Friday

By Eileen Houlihan
NEW YORK, Sept 28 (Reuters) - U.S. natural gas futures
seesawed on either side of positive territory early on Friday,
hovering just below Thursday's highest mark this year.
Traders said continued technical buying and a large number
of nuclear power plants down for maintenance have lifted prices
more than 16 percent in the past three sessions.
In addition, some said cooler weather on tap for next month
could stir some early heating demand, but most said current mild
autumn weather conditions should start to limit the upside.
Many also expect prices to have a hard time remaining well
above $3 per million British thermal units, the level at which
gas loses market share over coal for power generation.
As of 9:22 a.m. EDT (1322 GMT), front-month November natural
gas futures on the New York Mercantile Exchange were at
$3.289 per mmBtu, down 0.8 cent. The contract rose as high as
$3.318 on Thursday, its highest mark since last December.
The latest National Weather Service's six- to 10-day outlook
issued on Thursday called for normal temperatures for much of
the nation, with below-normal readings in the upper Northwest
and above-normal readings in the Southwest and along the East
Coast.
On the nuclear front, outages on Thursday totaled 16,500
megawatts, or 16 percent of U.S. capacity, down slightly from
16,600 MW out on Thursday, but up from 11,700 MW out a year ago
and a five-year outage rate of about 13,200 MW.

STORAGE SURPLUS SHRINKS, STOCKS STILL AT RECORD
Thursday's gas storage report from the U.S. Energy
Information Administration showed total domestic gas inventories
rose last week by 80 billion cubic feet to 3.576 trillion cubic
feet. It was the biggest weekly injection so far this year.

Traders viewed the build as slightly bearish, noting it was
above the Reuters poll estimate of 76 bcf and above the
five-year average increase for that week of 76 bcf, only the
second time the weekly build has been above the seasonal norm in
the past 22 weeks.
Record heat this summer helped trim a huge storage surplus
to last year from its late-March high near 900 bcf, but traders
expect builds to continue to pick up as weather loads fade.
Total domestic gas inventories are still at record highs for
this time of year and likely to end the stock building season
above last year's all-time high of 3.852 trillion cubic feet.
(Storage graphic: link.reuters.com/mup44s)
At 82 percent full, total stocks hovered at levels not
normally reached until the second week of October and still
offered a huge cushion that can help offset any weather-related
spikes in demand or supply disruptions from storms.

RIGS RISE IN LATEST WEEK, PRODUCTION STILL HIGH
Drilling for natural gas has been in a nearly steady decline
for the last 11 months, but the gas-directed rig count rose last
week by six to 454, Baker Hughes data showed. The tally hit a
13-year low the previous week.
While pure 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.
(Rig graphic: r.reuters.com/dyb62s)

(Editing by Sofina Mirza-Reid)