* Front-month hovers near one-month spot chart high * Hot weather back on tap in six to 10-day outlooks * Recent storage data, drilling rig data supportive * Coming Up: API oil data Tuesday, EIA oil data Wednesday (Adds cash prices, updates throughout) By Eileen Houlihan NEW YORK, June 26 (Reuters) - U.S. natural gas futures were little changed in choppy trading early Tuesday. Most traders expect more upside on forecasts for hot weather in much of the nation in the coming weeks. In addition, traders pointed out that Tropical Storm Debby knocked out more than 1.5 billion cubic feet of offshore gas production in the Gulf of Mexico before it headed for Florida. Recent inventory and drilling rig data remained supportive. As of 9:43 a.m. EDT (1343 GMT), front-month July natural gas futures on the New York Mercantile Exchange were at $2.68 per million British thermal units, down 1.4 cents, after trading in electronic trade between $2.648 and $2.719. The front month expires on Wednesday. On Monday the contract moved as high as $2.731, its highest mark since late May. Nearby futures rose to a 3-1/2-month high of $2.759 in mid-May, but that jump was said to reduce the appeal of gas over coal for power generation. Since posting a 10-year low of $1.902 twice in late April, nearby futures are up about 42 percent on signs record production was finally slowing and demand picking up as more electric utilities switched from coal to gas. In the cash market, gas bound for the NYMEX delivery point Henry Hub NG-W-HH in Louisiana was heard early at $2.70 on volume near 547 million cubic feet, flat to Monday's average. But early Hub cash deals firmed slightly to a 2-cent premium to the front month, from deals done late Monday about even with the front month. Gas on the Transco pipeline at the New York citygate NG-NYCZ6 was heard early near $2.83 on volume near 263 mmcf, up 1 cent from Monday's average of $2.82. ANOTHER LIGHT BUILD BUT STORAGE STILL AT RECORD Last week's storage report from the U.S. Energy Information Administration showed total domestic gas inventories rose by 62 billion cubic feet to 3.006 trillion cubic feet. The build was below average for an eighth straight week, raising expectations that record-high inventories could be trimmed to more manageable levels in the 21 weeks before winter withdrawals begin. The build trimmed the surplus to last year to 680 bcf, or 29 percent, and sliced the excess versus the five-year average to 641 bcf, or 27 percent. (Storage graphic: link.reuters.com/mup44s) But inventories remained at record highs for this time of year, topping the 3 tcf mark at the earliest on record, according to weekly and monthly EIA data going back more than 35 years. Total storage is already 73 percent full and hovering at a level not normally reached until late August. Producing-region stocks are at 83 percent of capacity. Concerns remained that the storage overhang could still drive prices to new lows this summer as storage caverns fill. The storage surplus to last year will have to be cut by at least another 435 bcf to avoid breaching the government's 4.1-tcf estimate of total capacity. Early estimates for this week's EIA report range from 40 bcf to 55 bcf versus a year-ago gain of 84 bcf and a five-year average build of 85 bcf. Stocks peaked last year in November at a record 3.852 tcf. The EIA expects gas storage to climb to a record 4.015 tcf by the end of October. DEMAND UP, PRODUCTION GROWTH SLOWS Gas demand picked up sharply this year as spring prices hit 10-year lows, prompting many utilities to use more gas-fired generators to produce power. Baker Hughes data on Friday showed the gas-directed rig count fell 21 to a 13-year low of 541, its eighth drop in nine weeks. (Rig graphic: r.reuters.com/dyb62s) A 42 percent drop in dry gas drilling in the last eight months has raised expectations that producers are finally getting serious about curbing record supplies. But the producer shift in focus away from dry gas to higher-value shale oil and shale gas liquid plays still produces plenty of associated gas that ends up in the market after processing. That has slowed the overall drop in dry gas output. While EIA expects 2012 marketed gas production to average a record high 68.47 bcf per day, up 3.4 percent from last year, it sees demand, driven by strong gains in the electric power sector, rising 4.1 percent. MORE FUNDAMENTALS The National Weather Service's six to 10-day outlook issued on Monday again called for above-normal readings for most of the nation, with below-normal readings only on the West Coast. Nuclear power plant outages were running at about 8,600 megawatts, or 8 percent, on Tuesday, down from 9,100 MW out a year ago but up from a five-year outage rate of just 5,600 MW. The U.S. National Hurricane Center was monitoring Tropical Storm Debby, over the northeastern Gulf of Mexico. No other storm formation was expected over the next 48 hours. The Atlantic hurricane season runs from June 1 through Nov. 30. The latest government statistics show the Gulf of Mexico accounts for 6 percent of U.S. gas production and just over 20 percent of U.S. oil production. (Reporting by Eileen Houlihan;editing by Sofina Mirza-Reid)

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