Continuing to prove that the on-again/off-again relationship between natural gas and crude markets is currently in off mode, November natural gas futures on Monday moved 18 cents higher to close at $7.050 while November crude dropped $1.42 to finish the day’s regular session at $80.24/bbl. Talks of a La Nina event returning to the Pacific also had gas traders wary of a repeat of the late 2000 price spike, which took place during the last recorded La Nina episode.

The diverging courses of oil and gas prices are all the more interesting as storm activity in the Gulf of Mexico and Atlantic continues to ramp up, putting natural gas and oil infrastructure on- and offshore in jeopardy. Forecasters on Monday were warning that a tropical or subtropical system could develop during the next couple of days near South Florida as a low-pressure system moves west-southwest toward the Gulf of Mexico.

“An area of low pressure will slide into the southeastern Gulf of Mexico Tuesday and will have to be watched for development over the next couple of days as water temperatures over the Gulf of Mexico remain very warm,” said Brett Anderson, a meteorologist with AccuWeather.com. “The system should continue to drift to the west or northwest through Wednesday as steering currents remain quite weak. Most of the rainfall associated with this area of low pressure will be north and east of the center.”

“I suppose, if one were looking for explanations why natural gas is as strong as it is — particularly in light of significant weakness elsewhere — this is it,” enerjay LLC broker Jay Levine said, referring to the Florida disturbance. “On the other hand, and there’s plenty of experience to back this up, one also recognizes that any of these markets — and, often, in particular natural gas — doesn’t need any explanations. Nevertheless, and since I’ve been asked by more than one market participant this day, [the November natural gas and crude contracts are] both at potentially explosive, if aggressive, pivot points.”

Other market watchers confirmed that most energy market interests will be mostly focused on the potential storm threat through the remainder of October. “The natural gas market continues to focus intently on the tropical weather outlook, with mixed developments over the weekend,” said Tim Evans, an analyst with Citigroup in New York. “Tropical Storms Karen and Melissa were broken apart by heavy wind shear, but there are low-pressure systems — one over the Bahamas and one south of Cuba — that bear watching.”

Evans said traders can also glean potential market-moving information from the Pacific Ocean as well. “We also note some talk of the developing La Nina pattern in Pacific Ocean sea surface temperatures with some connection with some Q4 cold from 2000, the last time the pattern was seen,” he said. “We’d note further, however, that the baseline National Weather Service outlook for the next three months (and somewhat beyond) features warmer than normal temperatures across most of the continental U.S. Early cold may be a possibility, but it is evidently not the base case scenario.”

A La Nina event is when ocean surface temperatures cool off the western coast of South America, which has been found to disrupt normal weather patterns in the United States. During the last recorded La Nina event in late 2000, natural gas futures prices jumped by $5.720. After the La Nina event came into play in late 2000, front-month natural gas futures recorded a low trade of $4.380 during the first week of November and a high trade of $10.100 during the last week of December. Whether the market will see a repeat of this phenomenon remains to be seen.

Looking at more near-term temperatures, Frontier Weather’s six-to 10-day outlook covering Oct. 6-10 is calling for above-normal temperatures from the Southwest through the central Rockies and parts of the northern Plains, as well as in New England, while normal conditions are expected elsewhere.

Breaking down this week’s expected temperatures, it would appear that conditions across major energy markets may keep the bulls corralled. The National Weather Service forecasts for the week ending Oct. 6 an unusually low number of heating degree days (HDD) in the Midwest and Northeast. New York, New Jersey and Pennsylvania are forecast to receive just 10 HDD, or a whopping 50 fewer than normal. The industrialized states of Ohio, Michigan, Indiana, Illinois and Wisconsin are also expected to experience just 10 HDD, or 52 fewer than normal.

According to a Bloomberg survey released Friday, 10 of 18 analysts, or 56%, said natural gas futures will fall during the week of Oct. 5. Six others, or 33%, said prices will rise. Two respondents, or 11%, said prices would be little changed. For the week of Sept. 28, 50% of survey respondents predicted that prices would fall and 33% said they would rise. During that week, November futures fell 12 cents to $6.870. The survey has correctly forecast the direction of prices 50% of the time since it began in June 2004, Bloomberg said.

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