NEW YORK, June 29 (Reuters) - U.S. natural gas futures shrugged off Thursday's bearish weekly inventory report and headed higher early on Friday, backed by hot near-term weather forecasts that should force more homeowners and businesses to crank up their air conditioners. But traders said the upside may be limited by 11-15 day forecasts that finally seemed to be trending cooler. Private forecaster MDA EarthSat scaled back slightly its temperature outlook in the 11-15 day period but still expects warmth to continue in the lower Midwest and Southeast. Most traders viewed Thursday's 57 billion cubic feet weekly inventory build as bearish, noting it came in above the Reuters poll estimate of 52 bcf and could be a sign that demand was slowing, possibly as higher gas prices prompt some utilities to switch back to coal from gas for power generation. The U.S. Energy Information Administration report showed that total stocks last week climbed to 3.063 trillion cubic feet, still a record high for this time of year. But the build was well below last year's gain of 84 bcf and the five-year average increase for that week of 85 bcf and again sharply cut the inventory surpluses to both of those benchmarks. At 9 a.m. EDT (1300 GMT), front-month August gas futures on the New York Mercantile Exchange were up 3.1 cents, or 1.1 percent, at $2.753 per million British thermal units after trading between $2.73 and $2.797. A warm June signaled an early start to the summer cooling season and helped drive prices up about 35 percent from mid-month lows in the $2.15 to 2.20 area. The July front-month contract hit a 5-1/2-month intraday high of $2.946 before it expired on Wednesday. Strong utility demand for gas has slowed inventory builds to below average for nine straight weeks and helped pull the surplus to last year down 26 percent from late-March highs. But many traders remain skeptical of the recent move up, noting stocks are still well above last year and the five-year average and offer a huge cushion to help meet any spikes in weather-related demand or supply disruptions from storms. Some also caution that as gas prices near $3, utilities could start using more coal to generate power. The NYMEX eastern coal to Henry Hub gas spread on Wednesday hit its narrowest in nearly a year, dipping below $1.10 per mmBtu (gas premium). The spread does not include transport costs. Chart traders noted Wednesday's front month run up above the 200-day moving average for the first time in 11 months was supportive, but agreed the near contract needed to settle above that benchmark, now at $2.84, to set the stage for more upside. ANOTHER BELOW-AVERAGE BUILD Lagging storage builds this season have raised expectations that record-high inventories can be trimmed to more manageable levels in the 20 weeks left before winter withdrawals begin. The weekly injection trimmed the surplus to last year by 27 bcf to 653 bcf, or 27 percent above the same week in 2011. It also sliced 28 bcf from the excess versus the five-year average, reducing the total to 613 bcf, or 25 percent. (Storage graphic: link.reuters.com/mup44s) Total storage is already 75 percent full and hovering at a level not normally reached until late August. Producing-region stocks are at 84 percent of estimated capacity. Concerns remain 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 405 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. The EIA expects gas storage to climb to a record 4.015 tcf by the end of October. Early injection estimates for next week's EIA report range from 39 bcf to 55 bcf versus last year's build of 90 bcf and the five-year average increase for this week of 79 bcf. DEMAND UP, PRODUCTION GROWTH SLOWS Gas demand picked up sharply this year as spring prices hit 10-year lows at $1.90 and prompted many utilities to use more gas-fired generators to produce power. But gas production is still flowing at near-record-high levels despite relatively low prices that have made many dry gas wells uneconomical. Traders were waiting for EIA's April gross gas production report due out on Friday after output in March fell for a second straight month. Baker Hughes drilling rig data was also expected on Friday. Last week's data showed the gas-directed rig count fell to 541, its eighth drop in nine weeks and the lowest since August 1999. (Rig graphic: r.reuters.com/dyb62s ) A 42 percent drop in dry gas drilling in the last eight months has fed perceptions that producers are getting serious about stemming the flood of record gas supplies. 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. That has slowed the overall drop in dry gas output. (Reporting By Joe Silha;editing by Sofina Mirza-Reid)

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