* Front month dips after hitting highest since October 2011 * Futures open interest sets third consecutive record high * Cold to continue through March, early April turns milder * Coming Up: EIA, Enerdata natgas storage data on Thursday By Joe Silha NEW YORK, March 20 (Reuters) - Front-month U.S. natural gas futures ended slightly lower on Wednesday after posting a 17-month high in overnight trade, as investors took profits despite cold weather forecasts and bullish inventory expectations for this week. Cold late-winter weather has helped drive futures up sharply over the last month, but some chart watchers agreed the front contract was overbought and due for a profit-taking pullback after gaining nearly 9 percent in the previous five sessions, its biggest five-day run up in two months. Traders said a milder turn in the outlook for early April weather also prompted some futures selling. "I think we saw a little profit taking and people responding to the morning forecast which took some of the heating demand out of the market," said Aaron Calder, an analyst at Gelber & Associates in Houston. Front-month gas futures on the New York Mercantile Exchange ended down 0.9 cent at $3.96 per million British thermal units after climbing overnight to $3.976, its highest since October 2011. The recent price rise - futures are up more than 25 percent in the last month - has been accompanied by strong gains in open interest, a bullish sign indicating that new buying and not short covering has fueled much of the upside. Futures-only open interest hit a record high for a third straight day on Tuesday, climbing more than 19,000 contracts to 1,340,116. Traders said some of that new length may be decided to cash out ahead of Thursday's inventory report. A cold winter has put a huge dent in inventories and should lend support to prices this year, but some traders agreed that the upside may be limited because supplies remained comfortable, with production flowing at or near an all-time peak. High gas prices above $4 could slow demand by prompting utilities to use more coal rather than gas to generate power and also increase gas supply by encouraging producers to hook up more wells. Forecaster MDA Weather Services still expects cold to blanket most of the nation for the next 10 days but noted that the 11-to-15-day outlook turned milder for the South and East. ANOTHER STRONG STORAGE DRAW EXPECTED Traders were waiting for the next U.S. Energy Information Administration storage report on Thursday. Inventory withdrawals have beat expectations for four straight weeks, and traders and analysts were looking for another above-average draw on Thursday, with most expecting inventories to have dropped by 70 billion cubic feet last week, according to a Reuters poll. Traders said a draw of that size would be supportive, noting stocks were unchanged during the same week in 2012, while the five-year average decline for that week is 26 bcf. Strong weekly withdrawals have prompted analysts to sharply lower estimates for end-winter storage, with many now expecting stocks to drop below 1.8 tcf, or about 4 percent above average, before inventory rebuilding begins again in April. A Reuters poll in mid-January showed most analysts had expected stocks to finish the heating season at about 2 tcf. So far this heating season, about 530 bcf, or 36 percent, more gas has been pulled from storage than last year at this time, but traders noted that stocks are still relatively high at 198 bcf, or 11 percent, above the five-year average. RIGS CLIMB, OUTPUT NOT SLOWING MUCH Baker Hughes data last week showed the gas-directed drilling rig count jumped sharply after posting a 14-year low the prior week. While the EIA last week lowered its growth forecast for 2013, it still expects marketed gas production to hit a record high for the third straight year.