While Tropical Storm Dean is expected to become the first hurricane of the Atlantic storm season later in the week, the more pressing news is that Tropical Depression 5 strengthened into Tropical Storm Erin on Wednesday morning. Erin, which has an outside chance of reaching hurricane strength, is expected to make landfall on the South Texas coast by Thursday morning.

“The [Erin] storm is in a low-shear environment; this combined with very warm waters in the Gulf should allow it to strengthen a little more as it approaches the lower Texas coast Wednesday night,” said Bob Tarr, a meteorologist with AccuWeather.com. “Landfall is forecast for Thursday morning along the South Texas coast.”

As of Wednesday, Erin was about 200 miles east of Brownsville, TX, moving to the west-northwest at nearly 14 mph. Maximum sustained winds were at 40 mph with higher gusts. AccuWeather.com Hurricane Center Chief Forecaster Joe Bastardi said the storm could reach hurricane strength before making landfall on Thursday south of Corpus Christi, TX.

A tropical storm watch is in effect for a number of Texan communities. Showers and thunderstorms along the coastline Wednesday were expected to evolve into a steadier and heavier rain that could result in flash flooding into Thursday.

Ahead of Erin’s arrival, natural gas and oil producers on Tuesday were evaluating the storm’s course and strength closely. While most were only monitoring conditions, Shell announced that it had evacuated some personnel and shut in 5 MMcf/d as a precaution (see Daily GPI, Aug. 15). Chevron said Wednesday that it had evacuated some personnel, but had not shut in any production.

According to Minerals Management Service (MMS) data as of Wednesday afternoon, personnel have been evacuated from a total of five production platforms, equivalent to 0.6% of the 834 manned platforms in the Gulf of Mexico. Personnel from one mobile rig have also been evacuated; this is equivalent to 1% of the 100 rigs currently operating in the Gulf. From the operators’ reports, it is estimated that no oil production in the Gulf has been shut in, while approximately 0.06% of the natural gas production in the Gulf has been shut in, roughly the 5 MMcf/d that Shell already announced. The MMS estimated that natural gas production from the Gulf of Mexico as of April 2007 was 7.7 Bcf/d.

While the industry’s attention is currently on Erin as the more immediate threat, forecasters say that Dean, which was still well east of the Lesser Antilles island chain Wednesday afternoon, is expected to become a Category 1 hurricane by Thursday night. The storm was moving west at nearly 20 mph, with maximum sustained winds near 60 mph.

“Tropical Storm Dean has plenty of warm water to work with to fuel its intensification,” said Kristina Baker, a meteorologist with AccuWeather.com. “The storm will also move into an environment that will allow the storm to strengthen. The storm should reach hurricane status by the end of the day on Thursday. Dean will then bear down on the Lesser Antilles Friday.”

Citigroup analyst Tim Evans said that while Erin was not of any real concern for the energy markets, Dean could cause trouble if it followed a particular path. However, with Dean still over a week away from possibly entering the Gulf, Evans said the path uncertainty at this point is very high.

“It’s difficult trying to keep up with all of the latest storm models and projected paths,” the analyst told NGI. “In the market, we have to react to changes in the weather forecast, but the focus on Tropical Storm Dean while the storm is still more than a week out in the Atlantic is a little bit silly. The difference between the storm’s various projected paths is immense. Two cycles ago, they said Dean would travel up the East Coast. Now it is going into the Yucatan. Does anyone notice that that is a difference of like 1,500 miles?

“When you look at where a storm is going 10 days out, the credibility of the projected path is almost pure speculation,” Evans said. “You almost feel like the meteorologists are using the spinner from a game of Twister.” He noted that path projection changes can swing the natural gas futures market almost instantly. “If the meteorologists say ‘right foot yellow,’ well, then that is what we’ll do in terms of the market.”

All of the storm talk was definitely making natural gas futures traders a little uneasy about the potential events to come (see related story). The September contract jumped to record a $7.180 high Wednesday morning, which is 24 cents higher than Tuesday’s close. However, the front month came back down to earth in the afternoon, closing at $6.864, down 7.6 cents on the day.

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