* Front month ends lower as longs take profits after recent gains
* Estimates for another light weekly storage build limit downside
* Still-warm forecasts for the next week also lend support
* Record inventories, high production keep buyers cautious
* Coming Up: EIA, Enerdata natgas storage data on Thursday (Releads, adds trader quote, technical, spread data, updates prices)
By Joe Silha
NEW YORK, July 25 (Reuters) - U.S. natural gas futures ended lower on Wednesday, pressured by profit taking after five straight session gains and ahead of the front-month August contract expiration on Friday.
Gas prices had shot up 14 percent in the previous five sessions, backed by warm weather forecasts that should slow storage injections for at least the next two weeks. It was the biggest five-day price run in more than a month.
"The physical (cash) market has been very strong because of all the heat, but we were bound to see some length get out, particularly with (August) expiration coming up on Friday," a Texas-based trader said.
Bullish technicals have helped drive the complex higher.
The chart picture for gas turned more bullish over the last few weeks as prices powered through some key resistance points like the 200-day moving average.
But some technical analysts agreed the market was due for a profit taking pullback, noting the 14-day relative strength index had climbed well into overbought territory.
Front-month August gas futures on the New York Mercantile Exchange, which expire on Friday, ended down 11.7 cents, or 3.7 percent, at $3.07 per million British thermal units after trading between $3.05 and $3.178. The nearby contract hit a seven-month high of $3.196 on Tuesday.
The price weakness up front widened spreads to winter months for the first time in eight sessions, with the December premium to August ending up 5.6 cents at 39.4 cents. That spread hit 33.8 cents on Tuesday, its narrowest in at least two years.
Early this year, decade-low prices below $2 per mmBtu helped tighten the supply/demand balance for gas by prompting many utilities to switch from coal to cheaper gas to generate power.
Record heat this summer, particularly in the Midwest but also at times in the Northeast, lifted demand further and helped drive gas prices up nearly 65 percent from spring lows.
A string of light weekly inventory builds and expectations for more of the same in coming weeks have also supported prices.
Widespread heat has slowed storage builds for 12 straight weeks and helped pull a record inventory surplus to year-ago down nearly 43 percent from late-March highs.
But many traders remain skeptical of the upside, noting peak summer heat will be fading in the next few weeks and storage and production are still at or near record highs.
Some traders also caution that as gas prices push above the $3 mark, many utilities that switched this year from coal to cheaper gas to generate power could move back to coal.
AccuWeather.com expects temperatures in the Northeast and Midwest, key gas-consuming regions, to average above normal for the next week, but highs mostly in the mid- or upper-80s Fahrenheit will fall short of some recent extremes.
ANOTHER BELOW-AVERAGE BUILD COMING
Lagging storage builds this season have raised expectations that record-high inventories can be trimmed to more manageable levels in the 17 weeks left before winter withdrawals begin.
A Reuters poll of industry traders and analysts on Wednesday showed most expected stocks to have gained 26 billion cubic feet last week, a build that would again cut the inventory surplus to last year and the five-year average.
Stocks rose an adjusted 48 bcf during the same week last year. The five-year average increase for that week is 61 bcf.
EIA data last week showed that total U.S. gas inventories for the week ended July 13 climbed to 3.163 trillion cubic feet, about 77 percent full and a level not normally reached until mid-September.
(Storage graphic: link.reuters.com/mup44s)
While the surpluses to year-ago and the five-year average have declined, there's still 500 bcf more gas in inventory this year than last year, a huge cushion that can help offset any unexpected spikes in demand or disruptions in supply.
The storage surplus to last year must be cut by at least another 260 bcf to avoid breaching the government's 4.1-tcf estimate of total capacity. Stocks peaked last year in November at a record 3.852 tcf. EIA estimates that gas storage will climb to 4.002 tcf by the end of October.
Concerns remain that the storage overhang could still drive prices to new lows later this summer as storage caverns fill.
U.S. gas production has slowed slightly this year, but output is still flowing near an all-time peak despite the steady decline in dry gas drilling to 13-year lows.
(Baker Hughes rig graphic: r.reuters.com/dyb62s )
Dry gas drilling has become largely uneconomical at current prices, but drillers have been moving rigs to more profitable shale oil and shale gas liquid plays that still produce plenty of associated gas that ends up in the market after processing.
Baker Hughes data last week showed that horizontal rigs, the type used to extract oil or gas from shale, fell for a second straight week. But the horizontal count at 1,164 is still not far below the all-time high of 1,193 hit nine weeks ago.
The shift to more horizontal drilling has slowed the overall drop in dry gas output. (Reporting by Eileen Houlihan; Editing by John Picinich, Sofina Mirza-Reid and Marguerita Choy)