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UPDATE 3-US natgas futures post 1st loss in 7 sessions

* Longs take profits, front month futures slide 4 percent

* Chilly Northeast, Midwest next week limits downside

* Coming up: EIA, Enerdata natgas storage data Thursday

(Releads, adds analyst quote, spread data, updates prices)

By Joe Silha

NEW YORK, Oct 3 (Reuters) - U.S. natural gas futures ended lower on Wednesday for the first time in seven sessions, hit by a slightly milder turn in the extended weather forecast and profit-taking ahead of Thursday's inventory report despite the still-cool outlook for next week.

Chart traders said the market was due for a technical pullback after climbing 24 percent in the previous six sessions, its biggest six-day run in three years.

Fundamental traders, too, remained skeptical of the upside, with storage and production still at or near record highs.

"The latest forecast from NOAA is showing a slightly smaller area of colder temperatures with the severity of the cold also eased somewhat. The early winter season demand bump may not be as large as thought just a week or so ago," Energy Management Institute's Dominick Chirichella said in a report.

Front-month gas futures

on the New York Mercantile Exchange ended down 13.6 cents, or 3.9 percent, at $3.395 per million British thermal units after sinking midday to an intraday low of $3.354. The nearby contract on Tuesday posted a 2012 high of $3.546.

After a fairly mild week this week, MDA EarthSat expects temperatures next week to cool to below normal for most of the eastern two-thirds of the nation.

But the private forecaster in its 11-to-15 day outlook noted the trend was shifting warmer, with above-normal readings expected in states west of the Rockies and seasonal temperatures seen for the rest of the nation.

Futures open interest jumped more than 76,000 contracts during the recent move up, indicating that new length helped back much of the upside.

But the 14-day exponential relative strength index on Tuesday climbed into very overbought territory near 85, its highest in more than 4-1/2 years and a possible warning to new longs that a selloff was imminent.

Stronger selling up front widened the January futures premium to November, with the spread gaining 4.3 cents, or nearly 12 percent, to 41.1 cents. In late July, that spread settled at 34.2 cents, its narrowest in about a year.

Competition from low-priced coal could also curb buying. As gas prices pushed well above the $3 mark, they became less competitive with coal and some utilities that were burning cheaper gas to generate power may have switched back to coal.

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

Producers, too, could be tempted if prices move much higher, opting to hook up wells that have been drilled but not flowing because gas prices below $3 were not very attractive.

INVENTORIES STILL AT RECORD

Energy Information Administration data last week showed that gas inventories for the week that ended Sept. 21 climbed to 3.576 trillion cubic feet, a record high for that time of year.

(Storage graphic: )

The weekly build of 80 billion cubic feet was the largest injection so far in 2012.

Traders and analysts polled by Reuters expect stocks to have gained 71 bcf in Thursday's EIA storage report.

Stocks rose an adjusted 101 bcf during the same week last year. The five-year average increase for that week is 78 bcf.

Record heat this summer helped trim a huge storage surplus relative to last year by 67 percent from its late-March high, but storage builds in autumn are likely to pick up if weather-related demand remains moderate.

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

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

PRODUCTION ALSO HIGH

Drilling for natural gas has been in a near-steady decline for almost a year, with the gas-directed rig count down some 54 percent since last October and posting a new 13-year low just last week.

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.

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

(Additional reporting by Eileen Houlihan; Editing by Sofina Mirza-Reid and Jim Marshall)

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

Keywords: MARKETS NYMEX/NATGAS