UPDATE 2-US natgas futures up for 5th day, front hits 2012 high

* Front month hits highest mark since early December 2011

* Cool Northeast, Midwest forecasts back recent gains

* Concerns grow that gas becoming less competitive with coal

(New throughout, adds analyst quote, updates prices, changes byline)

By Joe Silha

NEW YORK, Oct 1 (Reuters) - U.S. natural gas futures were higher on Monday for the fifth straight day, with Northeast and Midwest forecasts calling for cool weather for later this week and next week driving the front contract to a new high for the year.

Despite prospects for some early heating load, many traders and analysts remained skeptical of the upside with storage and production still at or near record highs.

Concerns also are growing that as gas prices push well above $3 per mmBtu some utilities, which have been burning cheaper gas to generate power, could switch back to coal.

Loss of that demand, which helped prop up gas prices all summer, could force more gas into a well-supplied market.

"Traders are starting to look ahead to winter - this is the first hint of cooler weather - but while there may be some heating demand, particularly in the Midwest, it may not be enough to sustain prices at these levels in the near term," said Jonathan Lee at Ecova Inc. in Washington.

At 1 p.m. EDT (1700 GMT), front-month gas futures

on

the New York Mercantile Exchange were up 12.9 cents, or near 4 percent, at $3.449 per million British thermal units after climbing earlier to a new 2012 high of $3.48.

The front month is up nearly 22 percent in the last five sessions. It would be the biggest five-day gain in about three years, but much of the increase occurred last Wednesday, when November took over front position with a 20-cent premium to the expiring October contract.

After a mild start to the week, AccuWeather.com expects temperatures in the Northeast and Midwest, key gas consuming regions, to cool to below normal, with overnight lows at times slipping to the high 30s and 40s Fahrenheit range.

RIGS DECLINE, PRODUCTION STILL HIGH

Baker Hughes data on Friday showed that the gas-directed rig count slid by 19 last week to a new 13-year low of 435.

The nearly steady decline in gas-directed drilling over the last year - the count is down 54 percent from its 2011 peak of 936 in October - has raised expectations that producers were finally set to slow record output.

But so far, production shows few, if any, signs of slowing.

(Rig graphic: )

While dry 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.

Energy Information Administration gross natural gas production data on Friday showed that July output climbed 0.4 percent from June to 72.58 billion cubic feet per day, just below January's record high of 72.74 bcfd.

STORAGE BUILDS PICK UP, STOCKS STILL AT RECORD

Data last week from EIA showed that total gas inventories for the week ended Sept. 21 rose by 80 bcf to 3.576 trillion cubic feet, a record high for this time of year. It was the biggest weekly injection so far this year.

(Storage graphic: )

While record heat this summer trimmed a huge storage surplus relative to last year by 67 percent from its late-March high, storage builds in autumn are likely to pick up as weather loads fade.

At 84 percent full, total stocks are hovering at a level not normally reached until the third week of October and still offers a huge cushion that can help offset any weather-related spikes in demand or supply disruptions from storms.

Early injection estimates for Thursday'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.

Gas inventories are still likely to end the stock-building season above last year's all-time high of 3.852 tcf.

(Additional reporting by Eileen Houlihan; Editing by Bob Burgdorfer)

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

Keywords: MARKETS NYMEX/NATGAS