Hurricane Gustav shut-ins in the Gulf of Mexico turned into Hurricane Ike shut-ins on Monday and natural gas futures traders took notice as the October contract traded into the high $7.60s to start the week before closing out Monday’s regular session at $7.527, up 7.8 cents from Friday’s finish.

Recent forecast changes put Ike traveling through the Gulf of Mexico and impacting either the central Gulf Coast or farther to the west in Texas sometime on Saturday. While producers and rig operators are taking all necessary precautions (see related story), some industry watchers are quick to point out that the devastating 2005 Atlantic hurricane season has left some pretty big shoes to fill.

“Gustav went right through the Gulf of Mexico and Ike looks like it might as well, but these events really have only been good for a half a buck to the upside for futures,” said Tim Evans, an analyst with Citi Futures Perspective in New York. “The thing that stands out to me is the extent that past experience may alter our response to events here. Coming into the 2005 hurricane season, there were many traders who had not been through that kind of cycle. We had Hurricane Katrina and then Hurricane Rita and lost something like 785 Bcf of Gulf production. That 2005 hurricane season set the bars very high for what is considered a high price for natural gas as well as what is defined as a major weather event. Through Monday, the cumulative loss from Gustav is 57.667 Bcf. While that is more lost production than we have had in some entire seasons, it is not currently anywhere near the level of what we saw in 2005.”

Evans said storage levels over the next number of weeks will play a key role in which way prices go. “We’re going to be chipping away at the 102 Bcf year-on-five-year average surplus. The way I am penciling in my storage forecasts, we are going to get at least two weeks of bullish storage numbers due to the hurricanes,” he added. “That will likely pull that surplus down to 50 Bcf. The major question is what will happen following those two weeks. If we revert right back to the above-average injections, then we might see prices looking at $7 again…or marginally lower. If we don’t flip back into that cycle of larger-than-average injections, then I think the market has more of a chance at a seasonal rally to price in the coming heating season. Prices could firm up through October and November if we get some early cold. Under that scenario, $8.500 or $9 don’t seem like crazy numbers. At this point I don’t have a strong reason to pick one scenario over the other.”

Whether or not the 2008 Atlantic hurricane season lives up to to that of 2005, all eyes remain on Ike and its shifting path this week. “As Hurricane Ike tracks westward just off the southern coast of Cuba [Monday], the Gulf Coast is paying close attention to the storm,” said Meghan Evans, a meteorologist with AccuWeather.com. “After making landfall and moving over land Sunday night, the storm has weakened below major hurricane status. It will still deliver a blow to Cuba through Tuesday. Late Tuesday the storm will leave the island and move into the open waters of the Gulf. It will again be fueled by deep, warm water and will likely regain major hurricane strength.

“The uncertainty lies in where will Ike go from there. High pressure north of the storm is steering it. If the high stays in place, then the storm will be steered more to the north toward the central Gulf Coast. If the high builds farther west, the storm will be steered farther west across the Gulf. Texas could be threatened if this is the case.”

Some traders see Ike coming to the bull’s rescue. “If not for Ike, nearby futures would likely be challenging the low side of our projected $7-8 trading parameters,” said Jim Ritterbusch of Ritterbusch and Associates. He said supply availability is not currently an issue since an approximate 100 Bcf storage surplus against average levels has been established and “should prove capable of offsetting the impact of both Gustav and Ike, assuming no significant damage from Ike.”

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