UPDATE 3-U.S. natgas futures end higher for 3rd straight session
* Front month remains above recent four-month spot low * Above-normal temperatures on tap for both coasts * Nuclear plant outages back above average By Eileen Houlihan NEW YORK, July 3 (Reuters) - U.S. natural gas futures rose for a third straight day on Wednesday, reversing early losses, as traders blamed short covering ahead of the U.S. Independence Day holiday on Thursday and hotter weather expected for the Northeast next week. "The latest National Weather Service six to 10-day and eight to 14-day temperature forecasts have not changed very much, with both coasts still expecting above-normal temperatures and the middle of the country forecast to experience normal to below normal temperatures," said Energy Management Institute partner Dominick Chirichella. "The call on natural gas for weather-related demand should be modestly above normal over the next several weeks but possibly not enough to result in a huge underperformance in the weekly inventory injections for the same timeframe," Chirichella added. Traders noted despite heat in the Northeast last week, this week's government storage report showed a build in line with expectations and the five-year average. "Considering there was some fairly intense heat last week and it only translated into neutral storage data it suggests that it will take even more extraordinary weather to produce a bullish result," said Citi Futures energy analyst Tim Evans. Weekly data from the U.S. Energy Information Administration showed total domestic inventories rose last week by 72 billion cubic feet, in line with Reuters poll estimates for a 71 bcf build and the five-year average build of 71 bcf for that week. This week's report was released one day earlier than usual due to the July 4 holiday on Thursday. Floor trading on the New York Mercantile Exchange will be closed Thursday for the holiday. Front-month August natural gas futures on NYMEX rose 3.6 cents, or just under 1 percent, to settle at $3.69 per million British thermal units. The contract traded between $3.573 and $3.695. It slid to a near four-month low of $3.526 on Friday. Other months ended higher for a third day as well, with the September contract rising 3.8 cents, also 1 percent, to $3.689, and winter months gaining about 3 cents each. Traders said hotter weather on tap for consuming regions in the Northeast next week and above-normal nuclear plant outages should keep near-term demand firm, but most expect further upside to be limited by milder weather forecast for the mid-Continent and healthy inventories. Total gas inventories at 2.605 trillion cubic feet are about 16 percent below last year's record high level, but only 1 percent below the five-year average level. Early injection estimates for next week's storage report range from 82 bcf to 102 bcf, versus a 34 bcf build during the same week last year and a five-year average increase for that week of 74 bcf. In the cash market, gas for delivery Thursday and Friday at the NYMEX benchmark, Henry Hub in Louisiana, slid 4 cents to $3.54, with late deals easing to 12 cents under the front month, compared with deals done late Tuesday at a 4-cent discount. Gas on the Transco pipeline at the New York citygate fell 6 cents on the day to $3.65. The latest National Weather Service six to 10-day forecast issued Tuesday called for above-normal temperatures for both coasts and normal or below-normal readings in the middle of the nation. Nuclear plant outages totaled 5,800 megawatts, or 6 percent of U.S. capacity, down from 8,600 MW out a year ago, but up from 5,700 MW out on Tuesday and a five-year average outage rate of 5,000 MW. Baker Hughes data showed the gas drilling rig count rose for a second straight week, gaining 2 to 355, after posting an 18-year low of 349 three weeks ago.