While some Gulf of Mexico producers were evacuating rigs and shutting in oil and natural gas production in preparation for Tropical Storm Arlene, natural gas futures traders seemed unshaken Friday as July natural gas settled at $6.932, down 11.3 cents on the day, but 5.2 cents up for the week.

Following Thursday’s sizeable price increases in the petroleum complex, “correction” appeared to be the key term Friday. July crude settled 74 cents lower on Friday at $53.54/bbl, while July heating oil and July unleaded gasoline closed 1.82 cents and 2.78 cents lower, respectively, at $1.6074/gallon and $1.5436/gallon.

One broker said he believed the natural gas futures market had already taken the storm and its potential ramifications into account. Since forecasters said Arlene at her worst would likely make landfall as no more than a weak hurricane, July natural gas fell Friday, he contended.

“It is not a real big storm,” said Tom Saal of Commercial Brokerage Corp. in Miami. “It may be a minimal hurricane when it hits and there are obviously precautions taken with regards to evacuations and shut-ins, but if that is all there is and the storm passes [without damage], we’ll be back to normal this week. If the storm is a nonevent and things are back to normal this week, then I think natural gas futures prices are going lower.”

IFR Energy Services Tim Evans said Friday afternoon that while Arlene had yet to hit, “the buying flow associated with the storm reached its peak [Friday] morning, with selling dominating the afternoon trade in anticipation that by Monday the remnants of the storm will be somewhere over the Midwest and that production will be getting back to normal in the Gulf of Mexico. There will be a chance for the market to review that assessment based on damage reports and even the resulting impact on DOE inventories, but it is pretty clear that, despite their similar paths, Arlene is no Ivan.”

As for other market factors, Saal said the “wild card” is crude oil, especially with the OPEC meeting this week. “The initial chit-chat is that they want to increase production,” he said. “If that happens, that might ease off the prices on crude oil. The connection between natural gas and crude futures has been the funds. They have come in and been simultaneously buying both crude oil and natural gas.”

If natural gas futures do break lower this week, Saal said the big number is $6.84 or $6.85. “That’s a huge number,” he said. “If we get below that, then we are thinking this thing could [really fall].”

Traders were surprised that Thursday’s reported natural gas storage injection of 112 Bcf did not produce any sustained downward price movement. Working gas inventories now stand at 1,890 Bcf, or 239 Bcf more than an year ago and 317 Bcf above the five-year average. Floor traders are perplexed. “Everyone keeps saying ‘we’re too high, we’re too high, and it should sell off.’ The big drop from the high of $7.43 Wednesday took a little of the air out of the market, though,” a New York floor trader remarked.

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