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Natural Gas Falls in Survey as Easing Cold May Cut Fuel Use

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Dec. 27 (Bloomberg) -- Natural gas futures will drop next week on speculation that a mid-December warm-up reduced demand for the heating fuel, according to a Bloomberg News survey.

Four of nine analysts, or 44 percent, said futures will fall on the New York Mercantile Exchange through Jan. 3. Three, or 33 percent, predicted gas will stay the same and two said prices will rise. Last week, 55 percent of participants said prices would decline.

The East Coast will see seasonal temperatures from Dec. 26 through Dec. 30 before readings drop through Jan. 9, said Commodity Weather Group LLC in Bethesda, Maryland. Gas prices last week rose to the highest level in more than two years after a government report showed a record supply decline in the wake of an unusually cold start to the heating season.

“We’ve had a tremendous rally; I’m leaning toward prices falling in the near term,” said Chris Jarvis, president and director of research at Caprock Risk Management LLC in Frederick, Maryland. “When you are looking at the weather maps, that severe cold spell we had for a prolonged period in key heating regions, you’re just not getting that again.”

Natural gas for January delivery fell 1.1 cents, or 0.2 percent, to $4.407 per million British thermal units this week on the Nymex, the first decline in eight weeks. Prices had climbed to $4.532 on Dec. 23, the highest intraday price since July 21, 2011. The market was closed Dec. 25 for Christmas.

Technical Outlook

Gas may also drop next week as the market is “severely overbought” from a technical standpoint, Jarvis said.

The relative strength index, or RSI, was at 69.3 late yesterday after hovering around 70 for the past month. A number above 70 is seen by some traders as a sell signal, while a number below 30 can be a signal to buy.

The high temperature in New York City will be 42 degrees (6 Celsius), 3 above normal, on Dec. 30 after dropping on Dec. 25 to 31 degrees, 9 lower than average, said AccuWeather Inc. in State College, Pennsylvania. About 49 percent of U.S. households use gas for heating, said the Energy Information Administration, the Energy Department’s statistical arm.

The gas survey has correctly forecast the direction of prices 51 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 gas futures will probably rise, fall or remain neutral in the coming week. This week’s results were:

RISE FALL NEUTRAL

2 4 3

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: Bill Banker at bbanker@bloomberg.net