By Joe Silha

NEW YORK, Nov 30 (Reuters) - Front-month U.S. natural gas

futures reversed course and headed lower by midday on Friday, as

concerns that mild weather next week will slow demand outweighed

early technical buying and short-covering before the weekend.

Technical traders said the front contract was due a bounce

after losing a total of 6.5 percent in three of four previous

sessions.

'The market (early) was taking a break after a sharp fall

this week, but we still have extremely mild weather forecast for

the first 10 days of December,' Gelber & Associates analyst

Aaron Calder said.

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

Nov. 23, has been under pressure this week as weather forecasts

into early December trended milder. Also weighing on sentiment

was a surprise inventory build on Thursday, even as most traders

in a Reuters poll were expecting a net decline.

While nuclear plant outages are still running at about

20,000 megawatts, more than double a year ago, and could lift

demand for gas, traders said lighter power loads next week might

reduce the need for replacement generation. Gas-fired plants are

usually used to cover any lost nuclear generation.

At 11:45 a.m. EST (1645 GMT), front-month gas futures

on the New York Mercantile Exchange were down 1.9 cents at

$3.629 per million British thermal units after trading in a

narrow range between $3.616 and $3.679.

Despite the recent cold snap that helped drive Henry Hub

cash prices to 14-month highs earlier this week, traders said

demand to heat homes and businesses should slow sharply next

week as temperatures moderate.

Most traders expect any price increases to be difficult

without sustained cold to boost demand, with storage and

production still at or near record highs.

AccuWeather.com said it expected temperatures in the key

gas-consuming regions of the Northeast and Midwest to average

above to much-above normal for the next week, with highs at

times topping 60 degrees Fahrenheit (15.6 Celsius).

SURPRISE BUILD

U.S. Energy Information Administration data on Thursday

showed domestic gas inventories had risen last week by 4 billion

cubic feet to 3.877 trillion cubic feet.

Traders viewed the build as bearish, noting a Reuters poll

was calling for a 12-bcf draw, while the five-year average for

that week was an 18-bcf decline. Only one of the 30 participants

in the Reuters poll had expected stocks to gain.

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

While a huge inventory overhang, which peaked in early April

at nearly 900 bcf, has been almost wiped out, storage is still

at record highs for this time of year and offers a comfortable

cushion to meet any winter spikes in demand or unexpected

disruptions in supply.

Stocks hit a record high of 3.929 tcf three weeks ago,

making this the fourth straight year in which inventories headed

into the heating season at a record peak.

Traders expect storage in next week's report to drop below

year-ago levels for the first time in 13 months, with early

withdrawal estimates ranging from 50 bcf to 90 bcf. Last year

during that week, stocks fell 14 bcf, while the five-year

average draw is 51 bcf.

PRODUCTION FAILS TO SLOW

Traders are waiting for the next drilling rig report from

Baker Hughes Inc on Friday.

Drilling for natural gas has mostly declined in the last

year, with gas rigs down 54 percent since peaking last year at

936 in October.

The gas rig count fell to a 13-1/2-year low just three weeks

ago, but so far production has shown no significant sign of

slowing.

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

The associated gas produced from more-profitable shale oil

and shale gas liquids wells has kept dry gas flowing this year

at or near a record pace.

(Editing by Dale Hudson, Theodore d'Afflisio and Lisa Von Ahn)

Keywords: MARKETS NYMEX/NATGAS

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

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