September natural gas futures plunged Monday as traders sought to discount the effects of Tropical Storm Edouard and shift their attention to the economy and a sympathetic drop by crude oil. September futures swan-dived 66.3 cents to $8.726 and the October contract fell 65.8 cents to $8.836. September crude oil dropped $3.69 to $121.41/bbl.

“It looks like no one is paying attention to the storm in the Gulf,” said an Oklahoma City trader. He added that in addition to the lack of attention paid by traders to the storm, “there is more an more evidence that crude demand is softening not only here but globally, and there is probably some influence on the natural gas from crude oil.”

The National Hurricane Center (NHC) reported that at 2.p.m. EDT Tropical Storm Edouard was located about 145 miles south-southeast of Lafayette, LA and was moving to the west northwest at 8 mph. Maximum sustained winds were 45 mph. Accordng to the NHC, the storm would by “very near” the upper Texas coast or southwest Louisiana by Tuesday morning.

Minerals Management Service (MMS) said 16 companies had reported the shut-ins of 555 MMcf/d of gas and 11,539 b/d of oil by 11:30 a.m. CDT. The companies also said they had evacuated 23 platforms and six mobile drilling rigs, according to MMS.

Floor traders are perplexed. “Last week we bounced off $9, settled at $9.38, but before you blinked this morning the market was trading $9. I thought the market would hold $8.95 but it got through there plus another 30 cents,” said a New York floor broker. He added that it “looked like some funds were long, and they are bailing out below the $8.90 level. We could bounce back to $9.50 or trade down to $8.25. I just don’t have a good feel for the market.”

According to the Oklahoma City trader, if the market were to close below the $8.883 low posted by the August contract in electronic trading just before it went off the board, the market would be giving up all hope of changing the dominant trend from down to up and generating a “sell” signal. As long as the market doesn’t trade significantly higher, it would maintain its downward trend. “You have to give it about $1.50 to $2. These trading ranges are a lot different than just a couple of years ago. It’s a dangerous market. You can go up to $10.50 and still be in a down trend,” he said.

Dangerous or not other traders are sticking to their guns and not recommending any changes because of the storm or Monday’s plunge. Mike DeVooght of DEVO Capital, a Colorado trading and risk management firm, continues to stick to his current trades. “On a trade basis, we continue to hold our current positions.” Trading accounts are advised to hold a short October/long January spread established at about 70-75 cents, end-users are counseled to stand aside, and producers should buy a winter 2008 $10 put strip if the spot contract closes below $9, DeVooght said. Otherwise producers should continue to hold a September-October put strip at 75 cents. “The larger-than-average builds in natural gas have had their effect on the Oct-Jan spread, which traded out to $1.00 on Friday,” he said in a note to clients.

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