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Natural Gas Futures Declining Toward $4: Technical Analysis

July 14 (Bloomberg) -- Natural gas may fall below $4 per million British thermal units if the August contract breaks below a key supporting level, according to a technical analysis by Chris Kostas, a senior analyst at Energy Security Analysis Inc. in Wakefield, Massachusetts.

A break below the August contract’s all-time low of $4.07 per million Btu, reached on May 6, will send the futures below $4 before it expires on July 28, and gas futures will approach $3 by September, according to Kostas.

“It’s going to spell trouble for the bears if we break into a new contract low and we can go down to the lower $3” range, said Kostas. “It’ll be bearish for the August contract, the September contract and the October one.”

Natural gas for August delivery fell 3.4 cents, or 0.8 percent, to settle at $4.354 per million Btu yesterday on the New York Mercantile Exchange.

The futures have declined in six of the past seven days and are down 12 percent from a month ago even as forecasts showing above-normal temperatures in the U.S. signaled stronger demand from power plants.

“It’s supposed to be hot and the trend is still bullish,” said Kostas. “But if it doesn’t hold we could move lower.”

To contact the reporter on this story: Moming Zhou in New York at Mzhou29@bloomberg.net

To contact the editor responsible for this story: Dan Stets at dstets@bloomberg.net.

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