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UPDATE 1-U.S. natgas futures slide 2 pct after fresh 2012 high

Tuesday, 2 Oct 2012 | 9:44 AM ET

* Front month slips from highest mark since Dec 2011

* Nuclear plant outages still strong

* Cooler weather on tap for much of the country

* Coming up: API oil data Tuesday, EIA oil data Wednesday

(Adds cash prices, trader quote, updates futures prices)

By Eileen Houlihan

NEW YORK, Oct 2 (Reuters) - U.S. natural gas futures slid nearly 2 percent early on Tuesday in some profit-taking from their five-day, nearly 23 percent run up to their highest mark this year.

"It seems as if we ran up too far too fast. There are a lot of nuclear plants off line and some near-term cold, but we need to see where the market stands after this cold spell," one Texas-based trader said.

Before sliding, front-month futures rose to a 2012 high in electronic trade amid forecasts for cooler weather in the coming days and the high number of nuclear power plant outages.

But many traders remain concerned that gas priced at well above $3 per million British thermal units will continue to lose market share from coal for power generation.

As of 9:33 a.m. EDT (1333 GMT), front-month November natural gas futures on the New York Mercantile Exchange

were at $3.427 per mmBtu, down 5.3 cents, or nearly 2 percent. The contract rose as high as $3.546, its loftiest mark since last December.

In the cash market, gas bound for the NYMEX delivery point Henry Hub

in Louisiana was heard early up 2 cents at $3.21 on volume near 679 million cubic feet.

Early deals were done at a 21-cent discount to the front month contract, little changed from deals done late Monday at a 22-cent discount.

Gas on the Transco pipeline at the New York citygate

was also heard up 2 cents at $3.38 on volume near 332 mmcf.

The National Weather Service's six- to 10-day outlook issued on Monday again called for below or much-below-normal temperatures for nearly the entire nation.

On the nuclear front, outages on Tuesday totaled 15,200 megawatts, or 15 percent of U.S. capacity, down slightly from 15,500 MW out on Monday, but up from 14,600 MW out a year ago and a five-year outage rate of about 14,800 MW.

STORAGE SURPLUS SHRINKS

Last week's gas storage report from the U.S. Energy Information Administration showed domestic gas inventories rose the previous week by 80 billion cubic feet to 3.576 trillion cubic feet. It was the biggest weekly injection so far this year.

Record heat this summer helped trim a huge storage surplus relative to last year from its late-March high near 900 bcf, but traders expect builds to continue to pick up as weather loads fade.

Domestic gas inventories are still at record peaks 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: )

At 82 percent full, stocks hover at levels not normally reached until the second week of October and still offer a huge cushion that can help offset any weather-related spikes in demand or supply disruptions from storms.

Early injection estimates for this week's EIA report range from 55 bcf to 75 bcf versus a year-earlier build of 101 bcf and the five-year average increase for the week of 78 bcf.

RIGS DECLINE, PRODUCTION STILL HIGH

Drilling for natural gas has been in a nearly steady decline for the last 11 months, sliding 19 last week to a 13-year low of 435, Baker Hughes data showed.

(Rig graphic: )

But 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.

EIA gross natural gas production data on Friday showed that July output climbed 0.4 percent from June to 72.58 bcf per day, not far below January's record high of 72.74 bcfd.

(Editing by Dale Hudson)

((eileen.houlihan@thomsonreuters.com, Twitter @eileenreuters)(+1 646 223-6074)(Reuters Messaging: eileen.houlihan.reuters.com@reuters.net))

Keywords: MARKETS NYMEX/NATGAS