* Colder 11-15 day noon runs drive gas prices higher midday
* Chilly near-term weather also supports market
* Record production, storage limit upside
* Coming up: Reuters natgas storage poll, EIA STEO report
(Releads, adds trader, analyst quotes, updates prices, changes byline)
By Joe Silha
NEW YORK, Oct 9 (Reuters) - U.S. natural gas futures reversed course and turned higher midday Tuesday after early selling, backed by a slightly colder turn in noon computer weather model projections.
The front-month contract, which posted a 2012 high of $3.546 per million British thermal units last Tuesday, has climbed 20 percent in the last two weeks as traders anticipated a pick up in demand 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-day forecast," a New York-based trader said.
While reports of the changed forecast drove prices up about 10 cents from the lows in less than 15 minutes on good volume, some traders cautioned that models predicting out 15 days were subject to volatile day-to-day swings and not usually reliable.
At 1:15 p.m. EDT (1715 GMT), front-month gas futures
on the New York Mercantile Exchange were up 1.9 cents at $3.422 per million British thermal units after trading between $3.346 and $3.456.
Despite chilly weather this week that has stirred more heating demand, most fundamental traders remain skeptical of further upside, with inventories at record highs for this time of year, production at or near an all-time peak and temperatures expected to moderate later this month.
"We did have a little cold this week that has held up prices, but if you look at the forecast, the map shows above normal temperatures for the majority of the country. I don't think the fundamentals are there to keep prices elevated," said Jonathan Lee, an energy procurement consultant at Ecova Inc.
After a chilly week this week, AccuWeather.com expected temperatures in the Northeast and Midwest, key gas-consuming regions, to warm to above normal next week, with highs reaching the high 60s and low 70s Fahrenheit.
Concerns about competition from low-priced coal may also limit the upside. As prices for gas pushed well above $3 over the last two weeks, it became less competitive with coal and may have prompted some utilities that were burning cheaper gas for power generation to switch back to coal.
Most analysts agree gas prices need to be well below $3 this autumn to maintain switching demand. Loss of that demand, which helped prop up gas prices all summer, could force more gas into already-packed inventories.
There are also concerns that if gas prices move much higher, producers could opt to hook up wells that have been drilled but not flowing because gas prices below $3 were unattractive.
STORAGE BUILDS PICK UP
U.S. Energy Information Administration data last week showed that domestic gas inventories for the week ended Sept. 28 rose by 77 billion cubic feet to 3.653 trillion cubic feet.
(Storage graphic: )
At 86 percent full, storage is hovering at a level not normally reached until the last week of October and offers a huge cushion that can help offset any weather-related spikes in demand or supply disruptions from storms.
Injection estimates for Thursday's EIA report range from 76 bcf to 98 bcf, with most in the low or mid 80s. Stocks rose an adjusted 108 bcf during the same week last year, while the five-year average increase for that week is 84 bcf.
Inventories are still at record highs for this time of year and likely to end the stock-building season above last year's all-time peak of 3.852 tcf.
Drilling for natural gas has been in a near-steady decline for the last year, with the gas-directed rig count down some 53 percent since last October and posting a 13-year low just two weeks ago.
But so far, production has shown 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 near record highs.
(Additional reporting by Eileen Houlihan; Editing by Marguerita Choy)
Keywords: MARKETS NYMEX/NATGAS