Adds latest prices

By Scott DiSavino

Aug 20 (Reuters) -U.S. natural gas futures slid about 2% on Tuesday on forecasts for cooler weatherover the next two weeks than previouslyexpected, which should cut the amount of gas power generators need to burn to keep air conditioners humming.

Front-month gas futures NGc1 for September delivery on the New York Mercantile Exchange fell 3.7 cents, or 1.7%, to settle at $2.198 per million British thermal units (mmBtu).On Monday, the contract closed at its highest price sinceJuly 22.

Another factor that has kept a lid on gas prices so far this year is the tremendous oversupply of gas in storage.

There was still about 13% more gas in storage than normal for this time of year even though weekly builds, including last week's rare decline in August, have been smaller than normal in 13 of the past 14 weeks. EIA/GAS NGAS/POLL

The storage decline during the week ended Aug. 9 was the first weekly withdrawal in August since 2006.

In the spot market, pipeline constraints caused next-day gas prices at the Waha hub NG-WAH-WTX-SNL in the Permian Shale in West Texas to average in negative territory again for a record 27th time this year.

Waha prices first averaged below zero in 2019. It happened 17 times in 2019, six in 2020 and once in 2023.

In Canada, next-day gas prices at the AECO hub NG-ASH-ALB-SNL in Alberta fell to 36 cents per mmBtu, their lowest level sinceOctober 2022.

SUPPLY AND DEMAND

Producers increase and decrease output in reaction to prices, but it usually takes a few months for changes in drilling activity to show up in the production data.

Average monthly spot prices at the U.S. Henry Hub benchmark NG-W-HH-SNL in Louisiana hit a 12-month high of $3.18 per mmBtu in January before dropping to a 44-month low of $1.72 in February and a 32-year low of $1.49 in March, according to Reuters and federal energy data.

In reaction to that price plunge, producers cut average monthly output from 106.0 billion cubic feet per day (bcfd) in February to 102.7 bcfd in March, 101.5 bcfd in April and a 17-month low of 101.3 bcfd in May, according to federal energy data.

Winter storms at the start of the year caused output to fall from a record 106.3 bcfd in December to 103.6 bcfd in January.

As monthly Henry Hub prices increased to $1.60 per mmBtu in April, $2.12 in May and $2.54 in June, some producers, including EQT EQT.N and Chesapeake Energy CHK.O, started to increase their drilling activities, boosting output to 101.0 bcfd in June and 103.4 bcfd in July.

But with average Henry Hub prices back down to $2.08 per mmBtu in July and $2.00 so far in August, analysts said output would likely decline as some producers reduce drilling activities again.

Financial firm LSEG said gas output in the U.S. Lower 48 states has slidto an average of 102.3 bcfd so far in August, down from 103.4 bcfd in July.

On a daily basis, LSEG said output was on track to drop by 1.9 bcfd to a preliminary nine-week low of 100.0 bcfd on Tuesday. If correct, that would be the biggest daily decline since April. Analysts, however, noted that preliminary data is often revised later in the day.

LSEG forecast average gas demand in the Lower 48, including exports, will rise from 103.7 bcfd this week to 104.3 bcfd next week. Those forecasts were lower than LSEG's outlook on Monday.

Reporting by Scott DiSavino; editing by Jonathan Oatis and Paul Simao

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

To determine CFTC managed money net position add (NYMEX Henry Hub options and futures combined 3023651MNET) plus (ICE Henry Hub options and futures combined 3023391MNET divided by four) plus (NYMEX Henry Hub swaps options and futures combined 303565BMNET divided by four) plus (NYMEX Henry Hub penultimate gas swaps 303565CMNET divided by four)

NYMEX Henry Hub options and futures combined 0#3CFTC023651

NYMEX Henry Hub futures only 0#1CFTC023651

ICE Henry Hub options and futures combined 0#3CFTC023391

NYMEX Henry Hub swaps options and futures combined 0#3CFTC03565B

NYMEX Henry Hub Penultimate gas swaps 0#3CFTC03565C