Just days after the natural gas industry sighed in relief after Hurricane Ophelia chose the Atlantic path instead of the Gulf of Mexico course, Tropical Storm Rita looks as if she might not be as accommodating. Fears over the storm’s projected Gulf path sent futures off to the races in Access trading Sunday night and again on Monday, with October natural gas settling $1.519 higher at $12.663, a new all-time prompt month record.

The National Hurricane Center (NHC) said Monday late afternoon that Rita appears to be on course to cross the Florida Keys Tuesday and threaten production in the Gulf Thursday before making landfall in Texas Saturday. The NHC added that strengthening is expected to continue and that Rita could become a hurricane before reaching the Florida Keys and a “major hurricane” in the Gulf.

Traders obviously took notice of Rita’s development over the weekend as October natural gas futures gapped higher Monday to open at $11.97. However, the storm’s impact on the market didn’t stop there. The prompt month hit a morning high of $12.58 just after 11 a.m. EDT and notched a $12.70 high late in the afternoon. That mark completely decimated the previous prompt month high of $12.30 set by the October contract on Aug. 31.

More important on Monday was what the winter futures contracts did. January 2006 natural gas closed at a whopping $14.015, while February was close behind at $13.845.

IFR Energy Services’ Tim Evans classified trading on Monday as “a little breezy” in the natural gas pit. “While I am sure the overall volume for the session was a healthy number, the selling interest was spread out very defensively over a wide range. Nobody was really eager to sell into this rally, but people were willing to throw a few contracts at it if the buyers came to their price.

“It’s Rita, Rita, Rita around here right now,” he said. “The water in the Gulf is plenty warm, so any storm that gets into that body of water right now has the potential to flare up into something substantial. In addition, we have been through this drill recently with Hurricane Katrina, so that makes the buying all the more aggressive and the selling all the more shy because clearly you had to buy early in the Katrina rally in order to get out with a profit.”

With Rita, Evans said everyone is really thinking “compound impact” due to the recent damage from Katrina. “However, you can only destroy a platform once,” he added. He noted that with roughly a third of Gulf production still shut in from Katrina, Rita is working on a smaller stage to begin with. In addition, Evans said that if the storm does keep to the path for landfall on the Texas coast, there is less natural gas production in the western Gulf than there is in the central Gulf.

“Another scenario,” Evans pointed out, is if “Rita traveled a few degrees south to the Mexican border. Everybody would be fooled. The next big sucking sound we would hear would be prices falling apart.”

In addition to Rita fears, OPEC policy debate also helped to scare petroleum futures much higher in Access trading and again on Monday morning. October crude closed $4.39 higher at $67.39/bbl, while October unleaded gasoline climbed 25.76 cents to $2.0427/gallon. October heating oil settled 20.14 cents at $2.0384/gallon.

“Prices are sharply higher, though, because Tropical Storm Rita has potential to hit the Texas coast as a powerful storm, putting refining capacity there at risk,” said Evans. “The natural gas market is sharply higher too, although it looks like this storm will stay well south of the bulk of the natural gas output in the central Gulf that is still in recovery from Hurricane Katrina.”

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