(Updates prices to midday)
NEW YORK, Dec 20 (Reuters) - U.S. natural gas futures eased slightly on profit taking early Friday after rising to a 29-month high overnight as concerns the market is oversold offset forecasts of mostly colder weather over the next few weeks.
On Thursday, gas climbed more than 5 percent after the U.S. Energy Information Administration reported natural gas stocks last week fell by 285 billion cubic feet, eclipsing the previous record of 274 bcf, set in January 2008.
Traders and analysts polled by Reuters, on average, had expected a drop of 258 bcf.
At 12:02 p.m. EST (1702 GMT), front-month January futures on the New York Mercantile Exchange were down 1 cent at $4.450 per million British thermal units.
The front-month traded during the current session as high as $4.492, the highest since July 2011.
"The natural gas market is in overbought territory and susceptible to a round of profit-taking selling. That said, the projected return to more winter-like weather starting next week should serve as a floor on any short-term selling in the market," said Dominick Chirichella, a partner at Energy Management Institute.
Private forecaster MDA Weather Services said temperatures will change from a warm weekend in the East to much colder weather over much of the country from Dec. 25 to Jan. 3.
In the cash market, gas for delivery through Monday at the Henry Hub <GT-HH-IDX> in Louisiana was up 9 cents to $4.35. Late deals however were done at 12 cents under the front-month contract, 4 under those done late Thursday.
Gas on the Transco pipeline at the New York citygate <E-TSCO6NY-IDX> was down 55 cents at $3.48.
Gas inventories peaked this year in early November at 3.834 trillion cubic feet, just 2 percent below last year's record highs at that time. Last week, total domestic gas inventories slid to 3.248 trillion cubic feet, 488 bcf, or 13 percent, below last year.
Chilly November and December weather triggered stock draws that were more than double the norm for that period and prompted analysts to scale back end-winter storage estimates.
Next week's report is likely to show another above-average drawdown, with early estimates ranging from 135 bcf to 160 bcf, versus a 74 bcf drop during the same week a year ago and a 125 bcf five-year average decline for the week.
If drawdowns for the rest of the heating season match the five-year average, storage would end winter below 1.5 tcf, the lowest since 2008.
Traders noted the premium of the March 2014 gas futures over the April contract shot up to its widest in seven months, as the March contract rose along with other winter heating contracts.
In U.S. nuclear news, there were 3,500 megawatts out on Friday versus 4,700 MW out on Thursday. That compares with 12,000 MW a year ago and a five-year average of 7,000 MW. (Reporting by Scott DiSavino, Eileen Houlihan and Julia Edwards; Editing by Steve Orlofsky and Bernadette Baum)