Adds latest prices

By Scott DiSavino

March 26 (Reuters) -U.S. natural gas futures fell about 3% to a 3-1/2-year low onTuesday on forecasts for milder weather and less heating demandover the next two weeks than previously expected and ample amounts of gasin storage.

Also weighing on prices was the expiration of the April futures contract and the low amounts of gasflowing to liquefied natural gas (LNG) export plants due to work expected to continue through May atFreeport LNG's export plant in Texas.

"Weather-driven demand for natural gas is set to drop ... over the next two weeks. With LNG feedgas demand wavering ... the low-demand shoulder season may prolong recent price weakness for natural gas," analysts at energy consulting firm EBW Analytics Group said in a note.

On its last day as the front-month, gas futures NGc1 for April delivery on the New York Mercantile Exchange fell 4.0 cents, or 2.5%, to settle at $1.575 per million British thermal units (mmBtu), their lowest close since June 2020.

Despite the drop in the April contract, futuresfor May NGK24, which will soon be the front-month, were little changedat around $1.79per mmBtu.

This is not the first time gas futures have collapsed to a 3-1/2-year low this year.

In February, gas prices also fell to their lowest since June 2020 asnear-record output, mostly mild weather and low winter heating demand allowed utilities to leave significantly more gas in storage than usual for this time of year.

Analysts estimated current gas stockpiles were around 41% above normal levels. EIA/GAS NGAS/POLL

Those lowprices willboost U.S. gas use to a record high in 2024, but cut production for the first time since 2020 when the COVID-19 pandemic destroyed demand for the fuel, according to the U.S. Energy Information Administration's latest outlook.

Output was already down by around 3% over the past month as several energy firms, including EQT EQT.N and Chesapeake Energy CHK.O, delayed well completions and cut back on other drilling activities.

EQT is currently the biggest U.S. gas producer and Chesapeake will soon become the biggest producer after its merger with Southwestern Energy SWN.N.

SUPPLY AND DEMAND

Financial firm LSEG said gas output in the Lower 48 U.S. states fell to an average of 100.2 billion cubic feet per day (bcfd) so far in March, down from 104.1 bcfd in February. That compares with a monthly record high of 105.5 bcfd in December 2023.

Meteorologists projected weather across the Lower 48 would remain mostly colder than normal through April 10.

But with seasonally warmer weather coming, LSEG forecast gas demand in the Lower 48, including exports, would fall from 112.3 bcfd this week to 107.1 bcfd next week. Those forecasts were lower than LSEG's outlook on Monday.

Gas flows to the seven big U.S. LNG export plants fell to an average of 13.2 bcfd so far in March, down from 13.7 bcfd in February. That compares with a monthly record of 14.7 bcfd in December.

Analysts do not expect U.S. LNG feedgas to return to record levels until all three liquefaction trains at Freeport LNG's export plant in Texas return to service.

Freeport has said it expects Trains 1 and 2 to remain shut until May for inspections and repairs, while Train 3 was operating. Each Freeport train can turn about 0.7 bcfd of gas into LNG.

Reporting by Scott DiSavino
Editing by Marguerita Choy

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