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Natural Gas Futures May Drop as Mild Weather Replaces Cold

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Dec. 28 (Bloomberg) -- Natural gas futures may drop next week on forecasts for moderate weather after a frigid start to January, a Bloomberg survey showed.

Seven of 14 analysts, or 50 percent, predicted that futures will decline on the New York Mercantile Exchange through Jan. 4. Five, or 36 percent, said gas will advance and two said prices will stay the same. Last week, 57 percent of participants said gas would rise this week.

Unusually cold weather will be replaced as warmer air spreads east from the central U.S. over the next 11 to 15 days, according to MDA Weather Services in Gaithersburg, Maryland.

A stockpile surplus has expanded in December as above-normal temperatures reduced demand for the heating fuel.

“Even though we have colder temperatures every day that goes by, we still have plenty in storage,” said Phil Flynn, senior market analyst at Price Futures Group in Chicago. “It’s not really cold enough to cut into that supply yet.”

Natural gas rose 1.8 cents, or 0.5 percent, to $3.469 per million British thermal units this week in New York. The futures are up 16 percent this year, heading for the first annual gain in five years.

Prices will probably stay in a tight range of around $3.30 to $3.50 with a “downward bias” because ample supplies, weather forecasts and thin trading volume during of the New Year’s holiday period, Flynn said.

Stockpile Decline

U.S. gas stockpiles fell by 72 billion cubic feet to 3.652 trillion during the week ended Dec. 21, the Energy Department said today. The drop matched estimates by analysts and Bloomberg users. The five-year average decline for the week is 140 billion, department data show.

An inventory surplus widened to 12.8 percent above the five-year average from 10.2 percent the previous week and 4.6 percent at the end of November.

The gas survey has correctly forecast the direction of prices 49 percent of the time since its June 2004 introduction.

Bloomberg’s survey of natural-gas analysts and traders asks for an assessment of whether Nymex natural-gas futures will probably rise, fall or remain neutral in the coming week. This week’s results were:

RISE FALL NEUTRAL

5 7 2

To contact the reporter on this story: Naureen S. Malik in New York at nmalik28@bloomberg.net

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

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