Wires

UPDATE 3-Change in computer weather models firms US natgas futures

* Colder 11-15 day noon computer run drives gas priceshigher

* Chilly near-term weather also lends support

* Record production, storage limit upside

* Coming up: Reuters natgas storage poll, EIA STEO reportWed

(Releads, adds meteorologist quote, nuclear outage data,updates prices)

By Joe Silha

NEW YORK, Oct 9 (Reuters) - U.S. natural gas futuresreversed course and ended higher on Tuesday after early selling,backed by a colder turn in computer weather model projectionsreleased at midday.

The front-month contract, which posted a 2012 high of $3.546per million British thermal units last Tuesday, has climbed 22percent in a little over two weeks as traders anticipated a pickup in demand this month from the season's first cold snap.

"It's all about weather, and it looks like the noon(computer) run turned a bit colder for the 11- to 15-dayforecast," a New York-based trader said.

Reports that the 11- to 15-day weather model had turnedcolder drove prices up about 10 cents from the lows in less than15 minutes on good volume.

The front month powered to an intraday high late in thesession and ended on a fairly strong note.

Front-month gas futures

on the New York MercantileExchange ended up 6.4 cents, or nearly 2 percent, at $3.467 permillion British thermal units after climbing late to a high of$3.515. The $3.346 low for the day was struck in mid morning.

But some cautioned that computer weather models that attemptto predict out 15 days can be quite volatile.

"(The 11-15 day model) definitely turned colder, but we'renot putting a lot of weight on this run. In that time frame,models have a tendency to change drastically," said PaulMarkert, staff meteorologist at private forecaster MDA EarthSat.

Chilly weather this week that has stirred more heatingdemand and helped underpin prices.

Nuclear plant outages have also lent some support. Theroughly 20,000 megawatts of nuclear generation mostly offlinefor seasonal maintenance this week have added about 600 millioncubic feet, or nearly 1 percent, to daily gas demand, accordingto data from Thomson Reuters Analytics.

But most fundamental traders remain skeptical of furtherupside, with inventories at record highs for this time of year,production at or near an all-time peak and temperatures expectedto moderate later this month.

MDA EarthSat's Markert said the extended forecast stillshows above normal temperatures from the East Coast to theeastern Midwest and Texas though he said the area of abovescould narrow a bit. "It's possible the central Midwest could seea cooler risk heading into tomorrow."

Concerns about competition from low-priced coal may alsokeep buyers cautious. As prices for gas pushed well above $3over the last two weeks, it became less competitive with coaland may have prompted some utilities that were burning cheapergas for power generation to switch back to coal.

Most analysts agree gas prices need to be well below $3 thisautumn to maintain switching demand. Loss of that demand, whichhelped prop up gas prices all summer, could force more gas intoalready-packed inventories.

There are also concerns that if gas prices move much higher,producers could opt to hook up wells that have been drilled butnot flowing because gas prices below $3 were unattractive.

STORAGE BUILDS PICK UP

U.S. Energy Information Administration data last week showedthat domestic gas inventories for the week ended Sept. 28 roseby 77 billion cubic feet to 3.653 trillion cubic feet.

(Storage graphic:)

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

Injection estimates for Thursday's EIA report range from 75bcf to 98 bcf, with most in the low or mid 80s. Stocks rose anadjusted 108 bcf during the same week last year, while thefive-year average increase for that week is 84 bcf.

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

HIGH PRODUCTION

Drilling for natural gas has been in a near-steady declinefor the last year, with the gas-directed rig count down some 53percent since last October and posting a 13-year low just twoweeks ago.

But so far, production has shown few, if any, signs ofslowing.

(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.

(Additional reporting by Eileen Houlihan; Editing by MargueritaChoy)

((joe.silha@thomsonreuters.com)(+1 646 223 6071)(ReutersMessaging: joe.silha.reuters.com@reuters.net))

Keywords: MARKETS NYMEX/NATGAS