For the third morning in a row natural gas futures gapped higherat the open before continuing upward as traders covered shortpositions in anticipation of Tropical Storm Bret becoming the firsthurricane in the 1999 Atlantic season. But after notching a $3.015high shortly after noon, the September contract was hit with a waveof profit-taking that delivered the spot month back down to settleat $2.938. Estimated volume was healthy, with 99,927 contractschanging hands.

According to Jesse Kosch of Omaha-based Strategic WeatherServices, Bret is expected to strengthen into a hurricane bySaturday and make landfall Monday with maximum sustained winds of90 miles per hour. “It is presently headed almost due north, but isexpected to be pulled to the west before encountering land. Thatwould put the eye passing about 100 miles south of Brownsville,Texas,” Kosch predicted. But a Gulf Coast risk manager seemedunimpressed. “That is a best-case scenario. Anything to the southof Corpus Christi will have little effect on production in theGulf,” he said.

Does that mean that prices are in for a big correction Mondaymorning? Possibly, he continued. “From a technical standpoint theprice outlook is mixed. On the daily chart the failure to settle inthe top half of [Friday]’s range is bearish, but posting a new highof $3.015 on the weekly chart is bullish.” For a more fundamentalperspective, however, he takes a trip back to the autumn of 1997when another bullish weather phenomenon-El Nino-drove prices to ahigh of $3.85. “That was the last time the market got so hyped upover the weather. Then, when winter failed to materialize, themarket crashed twice as fast as it peaked.”

Looking ahead, he feels that may be a possible script for themarket as soon as Bret ceases to pose a threat to production in theGulf of Mexico. This market has moved methodically higher in 7- and9-cent steps. Whenever you move up like that you create a vacuum,which can allow prices to tumble lower in a hurry, he said.

However, don’t sell the farm just yet. Thompson Global Marketswarns that this may be just the first of an ongoing series of stormdrills over the next two months or so. “Typically, that means buythe forecasts and sell either the arrival of the storm or adowngrade,” the group wrote in its Aug. 20 Pegasus Power Report.

Kosch agrees that the tropical season is heating up. “Strongwesterly winds aloft over the Atlantic for the past couple ofmonths have prevented the formation of tropical disturbances. Butnow that the Bermuda High has become more prevalent, the conditionsare right,” he said. The Bermuda High is a high pressure systemthat can dramatically affect weather systems in the Atlantic.

Above Friday’s $3.015 high, resistance stands in the $3.08-10area, while support is seen at $2.88 and $2.77-785, Thompson Globalreported.

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