UPDATE 3-US natgas futures down 5 pct, first loss in 4 sessions

* Profit-taking hits front-month futures after new 2012 high
* Milder turn in extended weather forecasts triggers selling
* Late-month outlook still chilly, limits downside
* Coming up: Reuters natural gas storage poll Wednesday

(Releads, adds analyst quote, updates prices)
By Joe Silha
NEW YORK, Oct 22 (Reuters) - U.S. natural gas futures ended
lower on M onday f or the first time in four sessions, p ressured
by profit-taking after an early front-month run to a new 2012
high and by reports extended forecasts for cold weather had
been revised to s lig htly milder.
" We saw a little profit taking after we hit the new high,
then selling accelerated around noon," said Jonathan Lee at
Ecova Inc., adding the slightly milder turn in computer weather
projections at midday may have triggered the sharp sell-off.
For much of the morning, gas prices seesawed on either side
of unchanged, then sold off sharply around midday.
Technical traders agreed the market was due for a pullback
after gaining 5 percent in the previous three sessions. T hey
noted th e 14-day relative strength index ha s been si gnaling a
pos sible bearish divergence by failing to hit a new peak even as
front-month prices posted new highs on Friday and Monday.
RSI is an underlying indicator of market momentum.
F ront-month gas futures on the New York Mercantile
Exchange e nded down 1 6 . 5 cents, or n ear 5 p ercent, at $3.45 2 per
million British thermal units after climbing early to a new 2012
high of $3.648. Th e contract hit a low of $4.433 in after-hours
electronic trade this afternoon.
Prior to today's sell-off nearby futures prices had been up
about 9 percent this month. So me fundamental traders w ere
s keptical ab out such prices wi thout c older weather arou nd,
n ot ing inventories were still at record highs for this time of
year and production was flowing at or near an all-time peak.
Nuclear plant outages are running nearly 6,000 megawatts
above year-ago levels and could also lift demand for gas, but
traders noted mild weather this week should slow overall power
loads and reduce the need for replacement generation.
But with fairly chilly weather forecast for late r this month
and in early November l ikely to s tir better h eating d emand, s ome
traders se e on ly limited downside fr om here.
After a few more days of mild weather, AccuWeather.com
e xpects temperatures i n t he Northeast and Midwest, key gas
consuming regions, to cool to below normal late this week and
next week as lows at times dip into the 30s Fahrenheit ar ea.
Some traders and analysts also caution that recent gains in
gas prices could increase supply by encouraging producers to
hook up more wells and slow demand by making gas less
competitive with coal for power generation.
That would loosen the supply/demand balance and could
trigger another downward spiral in gas prices, which hit 10-year
lows below $2 back in April.

PRODUCTION STILL STRONG
Baker Hughes data on Friday showed the gas-directed rig
count rose last week by five to 427 after posting a 13-year low
the previous week. The count has gained only nine times this
year, but three of those gains occurred in the last five weeks.
Drilling for natural gas has been in decline for most of the
last year, falling some 54 percent since peaking last year at
936 in October. But so far, production has not shown any
significant signs of slowing.
(Rig graphic: r.reuters.com/dyb62s )
The associated gas produced from more-profitable shale oil
and shale gas liquids wells has kept output near record highs.
The EIA recently said it expected marketed gas production in
2012 to be up about 4 percent from 2011's record levels, with a
0.5 percent gain predicted for 2013.

RECORD INVENTORIES
U.S. Energy Information Administration data last week showed
that domestic gas inventories for the week ended Oct. 12 rose by
51 billion cubic feet to 3.776 trillion cubic feet.
While the build came in above the Reuters poll estimate of
48 bcf, it was well below last year's gain and the five-year
average increase for that week and sharply cut the surplus
relative to both of those benchmarks.
(Storage graphic: link.reuters.com/mup44s )
A huge inventory overhang, which peaked in late March at
nearly 900 bcf, has been cut by 80 percent, but inventories are
still at record highs for this time of year.
At 89 percent full, stocks are already above the average
peak for the year of 3.7 tcf typically hit in early November.
Without some very cold weather soon, stocks are likely to
grow for three or four more weeks and end the injection season
above the record high of 3.852 tcf set last year.
Early injection estimates for Thursday's EIA report range
from 55 bcf to 77 bcf versus a year-earlier build of 95 bcf and
the five-year average increase for the week of 65 bcf.

(Reporting By Joe Silha; editing by Jim Marshall and Bob
Burgdorfer)