UPDATE 3-Short cover props up U.S. July natgas futures at expiration
* Forecasts turn warmer for northern tier states * Short covering lifts futures ahead of July expiration * Coming up: EIA, Enerdata natgas storage data Thursday By Joe Silha NEW YORK, June 26 (Reuters) - U.S. natural gas futures ended higher on Wednesday, underpinned by a slightly warmer extended weather outlook and some technical buying and short covering ahead of the July contract expiration. "There's a little heat around, but no big change in the fundamentals. The market got beat up pretty good over the last few days, so today it looked like shorts covering ahead of expiration and ahead of Thursday's inventory report," a Chicago-based trader said. Despite Tuesday's break of chart support, many technical traders agreed front-month futures were oversold and due for a short-covering bounce after losing 8 percent in the previous four sessions, their biggest four-day drop in seven weeks. Front-month July gas futures on the New York Mercantile Exchange expired up 6 cents, or 1.7 percent, at $3.707 per million British thermal units after slipping early to a 3-1/2-month low of $3.635. Hot weather remains in the West for the next two weeks, but private forecaster MDA Weather Services noted that the Northeast was slowly trending warmer, with higher readings also expected to stretch across northern tier states late in the period. But many traders remain skeptical of the upside without a sustained, broad-based heat wave to stir demand, particularly with gas inventories only slightly below normal for this time of year and production flowing at or near a record high. Traders and analysts polled by Reuters expect to see an increase of 88 billion cubic feet in gas inventories when the U.S. Energy The Baker Hughes gas drilling rig count fell to another 18-year low last week, but U.S. gas production has not slowed much, if at all, this year. The EIA expects gas output in 2013 to post a record high for a third straight year.