UPDATE 1-U.S. natgas futures edge lower as weather moderates

* Front month well below last week's 2012 high

* Nuclear power plant outages still strong

* Milder weather on tap for most of the country

* Coming up: API oil data Wednesday, EIA oil, gas dataThursday

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

By Eileen Houlihan

NEW YORK, Oct 9 (Reuters) - U.S. natural gas futures edgedlower early on Tuesday, as weather forecasts continued tomoderate after a chilly weekend in consuming regions.

"Weather forecasts for the East have shifted warmer for thesecond half of the month and the early part of November," saidAddison Armstrong, senior director of market research atTradition Energy.

The National Weather Service six- to 10-day outlook issuedon Monday called for above-normal temperatures for nearly theentire nation, limiting heating demand.

But nuclear power plant outages totaled about 20,000megawatts, or 20 percent of U.S. capacity, a factor that couldhelp limit more losses.

Still, many traders remain concerned that gas priced at wellabove $3 per million British thermal units will continue to losemarket share to coal for power generation.

As of 9:38 a.m. (1338 GMT), front-month November natural gasfutures on the New York Mercantile Exchange

were at$3.356 per mmBtu, down 4.7 cents, or a little more than 1percent. The contract rose as high as $3.546 one week ago, itshighest mark since December.

In the cash market, gas bound for the NYMEX delivery pointHenry Hub

in Louisiana was heard early flat on the dayat $3.18 on volume near 621 million cubic feet.

Early deals were done at a 19-cent discount to thefront-month contract, little changed from deals done late Mondayat a 20-cent discount.

Gas on the Transco pipeline at the New York citygate

was heard up 4 cents at $3.40 on volume near 289mmcf.STORAGE BUILDS GROW

Last week's gas storage report from the U.S. EnergyInformation Administration showed domestic gas inventories rosethe previous week by 77 billion cubic feet to 3.653 trillioncubic feet.

Storage stands 8 percent above the same week in 2011 and 8percent above the five-year average level.

(Storage graphic:)

Inventories are still at record highs for this time of yearand likely to end the stock-building season above last year'sall-time high of 3.852 tcf.

At 86 percent full, storage is hovering at a level notnormally reached until the last week of October, offering a hugecushion that can help offset any weather-related spikes indemand or supply disruptions from storms.

Early injection estimates for this week's EIA report rangefrom 76 bcf to 98 bcf versus a year-earlier build of 108 bcf andthe five-year average increase for the week of 84 bcf.


Baker Hughes data on Friday showed the gas-directed rigcount rose by two to 437 after sliding to another 13-year lowtwo weeks ago.

It was the second gain in three weeks, but only the eighthtime this year that the gas rig count has risen. The count isstill down 53 percent since peaking at 936 last October.

Drilling for natural gas has been in a near-steady declinefor the last year, but so far production has shown nosignificant sign of slowing.

(Rig graphic:)

While dry gas drilling has become largely uneconomical atcurrent prices, gas produced from more profitable shale oil andshale gas liquids wells has kept output near record highs.

(Editing by Kenneth Barry)

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