UPDATE 1-U.S. natgas futures up 3 pct early at fresh 2012 high

* Front month at highest mark since December 2011

* High nuclear plant outages boost near-term demand

* Cooler weather on tap for much of the nation

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

(Adds cash prices, updates futures prices)

By Eileen Houlihan

NEW YORK, Oct 1 (Reuters) - U.S. natural gas futures rosemore than 3 percent early on Monday, lifted to their highestmark this year amid forecasts for cooler weather in the comingdays and strong nuclear power plant outages.

The front month contract is up for a fifth straight session,

gaining 17 percent in the past four.

For September, the nearby contract posted a nearly 19percent rise, the biggest monthly gain in three years.

But many traders remained concerned that with prices above$3 per million British thermal units, natural gas w ill continueto lose market share from coal for power generation.

As of 9: 4 6 a.m. EDT (13 4 6 GMT), front-month November naturalgas futures on the New York Mercantile Exchange

were at$3.425 p er mmBtu, up 10.5 c ents, or just over 3 percent. Thecontract rose as high as $3.435, its highest mark since lastDecember.

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

in Louisiana was heard early up 1 2 cents a t$ 3.20 on volume near 66 0 m illion cubic feet.

Early deals were done at a 24-cent discount to the frontmonth contract.

Gas on the Transco pipeline at the New York citygate

was heard u p 16 cents at $3.3 5 on volume near 29 5m mcf.

The latest National Weather Service's six- to 10-day outlookissued on Sunday called for below or much-below-normaltemperatures for nearly the entire nation.

On the nuclear front, outages on Monday totaled 15,500megawatts, or 15 percent of U.S. capacity, down slightly from16,500 MW out on Friday, but up from 14,400 MW out a year agoand a five-year outage rate of about 14,300 MW.

STORAGE SURPLUS SHRINKS

Last week's gas storage report from the U.S. EnergyInformation Administration showed total domestic gas inventoriesrose the previous week by 80 billion cubic feet to 3.576trillion cubic feet. It was the biggest weekly injection so farthis year.

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

Total domestic gas inventories are still at record highs forthis time of year and likely to end the stock building seasonabove last year's all-time high of 3.852 trillion cubic feet.

(Storage graphic:)

At 82 percent full, total stocks hovered at levels notnormally reached until the second week of October and stilloffered a huge cushion that can help offset any weather-relatedspikes in demand or supply disruptions from storms.

Early injection estimates for this week's EIA report rangefrom 55 bcf to 81 bcf versus a year-earlier build of 101 bcf andthe five-year average increase for the week of 78 bcf.

RIGS DECLINE, PRODUCTION STUBBORNLY HIGH

Drilling for natural gas has been in a nearly steady declinefor the last 11 months, sliding 19 last week to a 13-year low of435, Baker Hughes data showed.

While pure gas drilling has become largely uneconomical atcurrent prices, gas produced from more profitable shale oil andshale gas liquids wells has kept output stubbornly high.

(Rig graphic:)

EIA gross natural gas production data on Friday showed thatJuly 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 Sofina Mirza-Reid and Alden Bentley)

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Keywords: MARKETS NYMEX/NATGAS