UPDATE 3-US natgas futures post 1st loss in 7 sessions

* Longs take profits, front month futures slide 4 percent
* Chilly Northeast, Midwest next week limits downside
* Coming up: EIA, Enerdata natgas storage data Thursday

(Releads, adds analyst quote, spread data, updates prices)
By Joe Silha
NEW YORK, Oct 3 (Reuters) - U.S. natural gas futures ended
lower on Wednesday for the first time in seven sessions, hit by
a slightly milder turn in the extended weather forecast and
profit-taking ahead of Thursday's inventory report despite the
still-cool outlook for next week.
Chart traders said the market was due for a technical
pullback after climbing 24 percent in the previous six sessions,
its biggest six-day run in three years.
Fundamental traders, too, remained skeptical of the upside,
with storage and production still at or near record highs.
"The latest forecast from NOAA is showing a slightly smaller
area of colder temperatures with the severity of the cold also
eased somewhat. The early winter season demand bump may not be
as large as thought just a week or so ago," Energy Management
Institute's Dominick Chirichella said in a report.
Front-month gas futures on the New York Mercantile
Exchange ended down 13.6 cents, or 3.9 percent, at $3.395 per
million British thermal units after sinking midday to an
intraday low of $3.354. The nearby contract on Tuesday posted a
2012 high of $3.546.
After a fairly mild week this week, MDA EarthSat expects
temperatures next week to cool to below normal for most of the
eastern two-thirds of the nation.
But the private forecaster in its 11-to-15 day outlook noted
the trend was shifting warmer, with above-normal readings
expected in states west of the Rockies and seasonal temperatures
seen for the rest of the nation.
Futures open interest jumped more than 76,000 contracts
during the recent move up, indicating that new length helped
back much of the upside.
But the 14-day exponential relative strength index on
Tuesday climbed into very overbought territory near 85, its
highest in more than 4-1/2 years and a possible warning to new
longs that a selloff was imminent.
Stronger selling up front widened the January futures
premium to November, with the spread gaining 4.3 cents, or
nearly 12 percent, to 41.1 cents. In late July, that spread
settled at 34.2 cents, its narrowest in about a year.
Competition from low-priced coal could also curb buying. As
gas prices pushed well above the $3 mark, they became less
competitive with coal and some utilities that were burning
cheaper gas to generate power may have switched back to coal.
Loss of that demand, which helped prop up gas prices all
summer, could force more gas into a well-supplied market.
Producers, too, could be tempted if prices move much higher,
opting to hook up wells that have been drilled but not flowing
because gas prices below $3 were not very attractive.

INVENTORIES STILL AT RECORD
Energy Information Administration data last week showed that
gas inventories for the week that ended Sept. 21 climbed to
3.576 trillion cubic feet, a record high for that time of year.
(Storage graphic: link.reuters.com/mup44s )
The weekly build of 80 billion cubic feet was the largest
injection so far in 2012.
Traders and analysts polled by Reuters expect stocks to have
gained 71 bcf in Thursday's EIA storage report.

Stocks rose an adjusted 101 bcf during the same week last
year. The five-year average increase for that week is 78 bcf.
Record heat this summer helped trim a huge storage surplus
relative to last year by 67 percent from its late-March high,
but storage builds in autumn are likely to pick up if
weather-related demand remains moderate.
At 84 percent full, total stocks are hovering at a level not
normally reached until the third week of October and still offer
a huge cushion that can help offset any weather-related spikes
in demand or supply disruptions from storms.
Gas inventories are still likely to end the stock-building
season above last year's all-time high of 3.852 tcf.

PRODUCTION ALSO HIGH
Drilling for natural gas has been in a near-steady decline
for almost a year, with the gas-directed rig count down some 54
percent since last October and posting a new 13-year low just
last week.
But so far production shows few, if any, signs of slowing.
(Rig graphic: r.reuters.com/dyb62s )
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.
EIA gross natural gas production data on Friday showed that
July output climbed 0.4 percent from June to 72.58 bcf per day,
just below January's record high of 72.74 bcfd.

(Additional reporting by Eileen Houlihan; Editing by Sofina
Mirza-Reid and Jim Marshall)