By Scott DiSavino

July 26 (Reuters) -U.S. natural gas futures held near a one-week low on Friday as rising output offset forecasts for more demand over the next two weeks than previously expected during what could be record heat in the Lower 48 U.S. states.

Also weighing on prices in recent weeks, as traders noted, was still a tremendous oversupply of gas in storage even though injections have been smaller than usual in 10 of the past 11 weeks.

Gas stockpiles were currently about 16% above normal for this time of year. EIA/GAS NGAS/POLL

Recent storage builds have mostly been smaller than usual because several producers cut output earlier in the year after futures prices dropped to 3-1/2-year lows in February and March, traders said.

Higher prices in April and May, however, prompted some drillers, including EQT EQT.N and Chesapeake Energy CHK.O, to boost output.

On its second to last day as the front-month, gas futures NGc1 for August delivery on the New York Mercantile Exchange remained unchanged at $2.038 per million British thermal units (mmBtu) at 9:38 a.m. EDT (1338 GMT).

That put the contract on track for its lowest close since July 17 for a third day in a row and keeps it within a penny of the 11-week closing low of $2.035 per mmBtu on July 17.

For the week, the front-month was down about 4% after dropping about 9% last week. That would be the sixth decline in seven weeks, putting the contract down about 30% during that time.

The latest weather forecasts called for extreme heat to return in August, which should boost the amount of gas power generators burn to produce electricity to keep air conditioners humming.

Meteorologists forecast temperatures across the Lower 48 states will average around 83.6 degrees Fahrenheit (28.7 Celsius) on Aug. 2, according to data from financial firm LSEG.

That would top the current record high average temperature of 83.0 F set on July 20, 2022, when power demand peaked at an all-time high of 742,600 megawatts, according to LSEG and federal energy data.

In addition to a possible fresh record for power demand, next week's heat was also on track to boost the volume of gas power generators burn to a record high on Aug. 2.

LSEG forecast power generators would burn about 55.5 billion cubic feet per day (bcfd) of gas on Aug. 2, which would top the current all-time high of 54.1 bcfd reached on July 9 when generators had to burn more gas due to a lack of wind power.

The amount of power produced by wind fell even further this week, dropping to a preliminary 59-month low on Tuesday.

SUPPLY AND DEMAND

LSEG said gas output in the Lower 48 states rose to an average of 102.4 billion cubic feet per day so far in July, from an average of 100.2 bcfd in June and a 17-month low of 99.4 bcfd in May.

U.S. output hit a monthly record high of 105.5 bcfd in December 2023.

Meteorologists projected weather across the Lower 48 would remain mostly near normal through July 28 before turning hotter than normal through at least Aug. 10.

With more heat coming, LSEG forecast average gas demand in the Lower 48, including exports, will rise from 105.8 bcfd this week to 106.0 bcfd next week and 111.8 bcfd in two weeks. The forecasts for this week and next week were higher than LSEG's outlook on Thursday.

Reporting by Scott DiSavino
Editing by Tomasz Janowski

For gas data on LSEG's Eikon type ENERGY in the search bar and then go to the GAS drop down and the NORTH AMERICA drop down.

For Interactive Map, type 'Interactive Map' in the box at upper left of the Eikon terminal

For graphics on Baker Hughes rig counts, see: http://graphics.thomsonreuters.com/15/rigcount/index.html

For next-day SNL U.S. gas prices, see: 0#SNL-NG

For next-day SNL U.S. power prices, see: 0#SNL-PWR

For U.S. natgas price and storage polls, see: NGAS/POLL

For U.S. nuclear power outages, see: NUKE/

For U.S. Northwest hydro power report, see: NWRFC

For U.S./Canada natural gas rig count vs Henry Hub futures price, see: http://tmsnrt.rs/2eT9k44

For the U.S. natural gas speed guide, see: USGAS

For the U.S. power speed guide, see: USPOWER

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