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Despite Shifting Ike Course, Futures Close Nearly Unchanged
Natural gas traders on Tuesday breathed a small sigh of relief as the unpredictable Hurricane Ike changed paths to a more westerly course that should spare much of the Gulf of Mexico’s energy infrastructure. Despite the news, October natural gas futures settled almost unchanged at $7.535, due likely to the fact that it is still early and the storm’s path could very well change again.
Other energy traders were prepared to relax a little more on Ike’s new path. The big news on the day was over in the crude futures arena, where front-month crude recorded a five-month low on its way to closing at $103.26/bbl, down $3.08 from Monday’s close. The last time prompt-month crude traded lower than Tuesday’s $103.11/bbl low was back on April 2, when the front month got as low as $99.84/bbl.
After trading lower in the overnight Globex electronic session, October natural gas opened Tuesday’s regular session at the day’s $7.144 low. However, the contract consistently climbed higher from there, putting in a high of $7.640 just minutes before closing.
For the time being, it appears that Louisiana and Florida are out of the woods as far as Ike impact is concerned. Even with the changed path, energy companies are still on high alert in the Gulf of Mexico (see related story).
“Ike will continue moving more west than north simply because there is no other choice,” said John Kocet, senior meteorologist with AccuWeather.com. “The jet stream is maintaining a strong upper-air ridge over the eastern United States. This makes the westward track the path of least resistance. Once the storm starts to feel the influence of the western trough, it will curve toward the north but that may not happen until after landfall.
“What are the implications?” Kocet rhetorically asked in a note. “First, the entire region from Florida to Louisiana is being spared. Also, the worst of the storm is likely to pass south of the heaviest concentration of oil platforms. The unfortunate part of all this is that the southern two-thirds of the Texas coast is in line for a nasty blow later Friday into Saturday.”
Analysts suggest that hefty supplies are a factor in the recent muted price of natural gas. “If you can’t get natural gas up to $8 in light of the second hurricane that is going to hit the area, there must be a fundamental reason. That is due to the surplus. We have too much natural gas,” said a New York broker.
Speaking prior to Tuesday’s regular session, the broker noted that the market risk is to the downside. “If we break $104 in crude oil, and if we break $7 in natural gas, that is one thing, but we don’t think it will happen before the hurricane. If it does, that would be even more of a statement.”
If true, then crude just made a statement on Tuesday.
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