By Joe Silha

NEW YORK, Dec 11 (Reuters) - Front-month U.S. natural gas

futures ended lower on Tuesday for a fourth straight day,

undermined by ample supply and relatively mild weather forecasts

for the next week or so that should slow overall heating demand.

Without some sustained cold to boost heating loads, most

traders expect gas prices to remain on the defensive with

inventories still at record highs for this time of year and

production flowing at or near an all-time peak.

'Winter is the super bowl of natural gas, but we don't have

any cold weather yet,' said Tom Saal at INTL FCStone in Miami.

But he said, 'We're in a minor downtrend, but the market is

getting oversold, so we might get some support from that.'

Front-month gas futures on the New York Mercantile

Exchange ended down 4.8 cents, or 1.4 percent, at $3.412 per

million British thermal units after sinking early to a six-week

low of $3.391.

The front contract, which hit a 13-month high of $3.933 a

little over two weeks ago, has lost nearly 8 percent in the

previous four sessions, its biggest four-day slide in 12 weeks.

Chart traders noted the technicals had turned bearish over

the last week or so as the nearby contract broke some key

support and gapped lower on Monday.

But some agreed the market was due for a bounce after its

recent stumble. They noted the 14-day relative strength index

had dropped into very oversold territory in the low 30s.

Commodity Weather Group expects temperatures for the eastern

half of the United States to average above normal next week,

then moderate to mostly seasonal during the Christmas week.

But in its morning report, the private forecaster also said

that it continues to favor a colder 16-30 day outlook for the

northern half of the U.S.

Many traders remain skeptical about extended weather

outlooks, noting computer predictions out that far have not been

very reliable. They also noted that demand during the Christmas

and New Year's holiday weeks typically slows regardless of

weather because many schools and businesses are closed.

BEARISH INVENTORY REPORTS AHEAD

EIA data last week showed gas inventories for the week ended

Nov. 30 fell 73 billion cubic feet to 3.804 trillion cubic feet.

While the storage last week fell below year-ago levels for

the first time in 13 months, traders noted that total stocks

were still 168 bcf, or 5 percent, above the five-year average, a

comfortable cushion to meet any winter spikes in demand or

unexpected disruptions in supply.

(Storage graphic: http://link.reuters.com/mup44s )

A huge inventory surplus to last year, which peaked in April

at nearly 900 bcf, has been wiped out, but stocks are expected

to climb back above year-ago levels in Thursday's EIA report.

Estimates range from a build of 6 bcf to a draw of 27 bcf.

That would be well short of the 79 bcf drop during the same week

last year, while the five-year average decline for that week is

113 bcf.

Stocks hit a record high of 3.929 tcf in early November,

making this the fourth straight year in which gas inventories

have headed into the heating season at a record peak.

RIGS DECLINE, PRODUCTION STILL NEAR RECORD

Baker Hughes data on Friday showed the gas-directed

rig count fell by seven last week to 417, still just above the

13-1/2 year low of 413 posted four weeks ago.

(Rig graphic: http://r.reuters.com/dyb62s)

Drilling for natural gas has mostly been in decline for more

than a year, with gas rigs down 55 percent since peaking in 2011

at 936 in October. But so far production has shown no

significant sign of slowing.

In its short-term energy outlook for December, EIA said

Tuesday it expects gas production in 2013 to climb to a record

high for a third straight year, while consumption was expected

to drop slightly from 2012 levels.

(Additional reporting by Eileen Houlihan; editing by Andrew Hay

and Sofina Mirza-Reid)

Keywords: MARKETS NYMEX/NATGAS

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

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