* Front month contract below Tuesday's 7-1/2-month spot high * Hot weather still on tap in most long-term outlooks * Recent storage data, drilling rig data supportive * Coming Up: EIA oil data Wednesday, EIA gas data Thursday (Adds cash prices, updates throughout) By Eileen Houlihan NEW YORK, Aug 1 (Reuters) - U.S. natural gas futures slid slightly in early trading Wednesday, with traders blaming some profit-taking after Tuesday's 7-1/2-month spot chart high. But most traders expect continued hot weather and a stir in tropical activity to limit further losses. Others said prices should have a hard time remaining well above the $3 level, where gas loses much of its appeal over coal for power generation. As of 9:44 a.m. EDT (1344 GMT), front-month September natural gas futures on the New York Mercantile Exchange were at $3.193 per million British thermal units, down 1.6 cents, or less than 1 percent. Since posting a 10-year low of $1.902 in late April, gas futures are up 66 percent on signs that record production is slowing and demand is picking up as electric utilities switch 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 $3.20 on volume near 687 million cubic feet, flat to Tuesday's average and its highest level since early December. Early Hub cash deals were done at a 2-cent premium to the front month, little changed from deals done late Tuesday at a 1-cent premium. Gas on the Transco pipeline at the New York citygate NG-NYCZ6 was heard early near $3.50 on volume near 297 mmcf, up 7 cents from Tuesday's average of $3.43. ANOTHER LIGHT WEEKLY STORAGE BUILD Last week's gas storage report from the U.S. Energy Information Administration showed total domestic gas inventories rose by 26 billion cubic feet to 3.189 trillion cubic feet. The build matched Reuters poll estimates but fell well short of the year-earlier gain of 48 bcf and the five-year average increase for the week of 61 bcf. It is the 13th straight week builds have fallen below seasonal norms. Lagging storage builds this season have raised expectations that record-high storage can be trimmed to more manageable levels in the 16 weeks left before winter withdrawals begin. Last week's injection trimmed the surplus to last year to 487 bcf, or 18 percent above the same week in 2011. It also sliced the excess to the five-year average to 435 bcf, or 16 percent. (Storage graphic: link.reuters.com/mup44s) But total storage stands about 80 percent full, a level not normally reached until mid-September. Producing-region stocks are at 84 percent of estimated capacity. Concerns remain that the storage overhang could still drive prices to new lows later this summer as storage caverns fill. The storage surplus to last year must be cut by at least another 240 bcf to avoid reaching 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. Early injection estimates for this week's EIA report range from 16 bcf to 28 bcf versus last year's build of 43 bcf and the five-year average increase for the week of 56 bcf. STUBBORNLY HIGH PRODUCTION The EIA monthly gross natural gas production report on Tuesday showed that May output held unchanged from April at 72.39 bcf per day, just shy of January's record of 72.74 bcfd. Traders have been looking for signs that relatively low gas prices might finally slow record output, but production is still at 3 bcfd, or 4.3 percent, above the same year-ago month. The gas-directed rig count has declined in eight of the last nine weeks, sinking to its lowest level in 13 years. (Rig graphic: r.reuters.com/dyb62s) Dry gas drilling has become largely uneconomical at current prices, and a 46 percent drop in the gas rig count over the last nine months has fed expectations that producers were getting serious about stemming the flood of record gas supplies. But drillers have moved 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. MORE FUNDAMENTALS The National Weather Service's 6- to 10-day outlook issued on Tuesday again called for above-normal temperatures for nearly the entire nation, with below-normal readings only on the West Coast and some normal readings along the Gulf Coast and in Florida and parts of the Midwest. On the nuclear front, total outages tallied 5,800 megawatts, or 6 percent of U.S. capacity, on Wednesday, on par with the 5,800 MW out a year ago but above the five-year outage rate of 4,400 MW. The U.S. National Hurricane Center said a low pressure system 1,000 miles east of the southern Windward Islands had a 60 percent chance of further development over the next 48 hours as it moved westward. 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 John Wallace)

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