Natural gas futures were trading a couple pennies higher early Wednesday as traders were monitoring the progress of a storm brewing over the Gulf of Mexico (GOM).

The latest forecasts as of early Wednesday trended slightly cooler while maintaining a “very hot pattern overall,” according to Bespoke Weather Services, which said the pattern over the weekend carries cooler risks due to potential rains associated with the system forecasters have dubbed Tropical Storm (TS) Barry limiting heat in areas of the southern United States.

“The system will move westward before making landfall this weekend somewhere from Louisiana to far southeast Texas, perhaps as a hurricane, though right now heavy rain is the big concern,” Bespoke said.

“Once this feature is out of the picture, the pattern remains impressively hot as we move back into the back half of July.” The pattern could shift “a little less hot as we head toward the final week of the month, but still hot enough so that we project” total July gas-weighted degree days “will rank in the top three for any July on record, behind only 2011 and 2012.”

As of 8 a.m. ET Wednesday, the National Hurricane Center (NHC) was reporting a 90% chance of cyclone formation that could lead to TS Barry in the GOM over the next five days.

“A broad low pressure area located over the northeastern Gulf of Mexico about 100 miles south-southwest of Apalachicola, FL, is producing widespread cloudiness and disorganized showers and thunderstorms,” the NHC said. “Environmental conditions are conducive for development of this system, and a tropical depression is expected to form late today or Thursday while the low moves slowly westward across the northern Gulf of Mexico.

“...This system could produce storm surge and tropical-storm- or hurricane-force- winds across portions of the Louisiana, Mississippi and Upper Texas coasts later this week, and interests there should closely monitor its progress.”

INTL FCStone Financial Inc. Senior Vice President Tom Saal said the storm could contribute positive price pressure if it forces rig evacuations, while negative price pressure could come from cooler temperatures or impacts to liquefied natural gas export activities. In fact, platform evacuations were underway Wednesday, with Chevron Corp. evacuating several rigs. BP plc and Royal Dutch Shell plc were also evacuating offshore personnel.

Meanwhile, looking back at Tuesday’s price increase, EBW Analytics Group CEO Andy Weissman noted that contracts further along the strip recorded larger gains than the front month, including a 4.3 cent rally for January.

“January’s rise most likely was partly due to mounting indications that El Nino conditions may fade, increasing the odds winter weather will be colder than previously forecast,” Weissman said. “If this trend continues, it could add upward momentum for contracts at the front end of the forward curve.

“Traders are likely to be cautious during the next few trading sessions, waiting for Thursday’s storage report and trying to assess potential demand destruction” from the storm developing over the GOM. “Next week, though, the August contract could make a serious run” higher toward the mid $2.50s.

August crude oil futures were up $1.38 to $59.21/bbl shortly after 8:30 a.m. ET, while August RBOB gasoline was up around 3.8 cents to $1.9653/gal.