With Hurricane Ivan’s initial impact on production already factored into the market, and it being too soon to assess damage to Gulf infrastructure, October natural gas futures resumed their pre-Ivan path lower on Wednesday.

After testing higher in the morning up to $4.97, the prompt month spent the rest of the session wandering lower. Following two bounces off a $4.75 low late in the afternoon, October settled at $4.824, down 10.4 cents on the day. Volume was heavy with 109,070 contracts changing hands.

“All the market is doing is consolidating and marking time until we see if there is any damage to those rigs east of the Mississippi, which account for approximately 3 Bcf/d,” said Ed Kennedy of Commercial Brokerage Corp. “That won’t be for a few days because your not going to do the low level reconnaissance to see if the rigs are damaged during a hurricane. That will likely be Friday at the earliest.”

Noting that it’s not the wind that does the damage, it’s the waves, Kennedy said the hurricane could deal a “historic blow” to Mobile Bay. “If Ivan doesn’t turn pretty soon, it is going to put Mobile Bay — which is shaped like a cone — on the east side of the hurricane’s eyewall,” he said. “Right now, it is not turning. It looks a lot like Camille (1969) right now.”

As of 4 p.m. (CDT) Wednesday, the National Hurricane Center said Category 4 Hurricane Ivan was about 125 miles south of the Alabama coastline, moving due north at near 14 mph with maximum sustained winds of 135 mph. The NHC said the hurricane is expected to make landfall late Wednesday or early Thursday and is expected to maintain at least a Category 3 rating.

A Washington, DC-based broker agreed that it will likely take a few days to get any confirmation on rig and platform damage from Ivan. He added that the industry also needs to worry about flooding, which can damage the pipelines on land in that region.

“It clearly seems that the futures spike is over in terms of staying up in the front month contract,” he said. “I would tend to think that unless there is some major mechanical disruption or damage to infrastructure, we will probably see testing back down to that $4.50 level.”

He noted that the futures’ winter months took a beating on Wednesday, with December, January and February losing 17.7 cents, 18.7 cents and 19.7 cents, respectively.

“Once again, we saw those winter months really getting clobbered a little bit harder,” the broker said. “I wouldn’t be quite so quick to sell the back months. I don’t know who really has a need for all that much October gas, so I can understand why people are dumping that because they don’t need to cover it anymore and certainly the speculators are probably playing it on the short side.”

Looking down the road, he said the question becomes whether the back months will be able to break below the $6.40-6.50 level, in which case, the chart picture starts turning decidedly more bearish.

Updating production shut in by Hurricane Ivan, the Minerals Management Service (MMS) reported Wednesday that 575 offshore platforms and 69 drilling rigs had been evacuated in the Gulf, shutting in approximately 6 Bcf/d of natural gas and 1.3 million b/d of oil. The figures were up from Tuesday’s updated data, which reported that 399 offshore platforms and 61 drilling rigs had been evacuated, shutting in 4.4 Bcf/d of natural gas and 1.1 million b/d of crude oil.

The MMS reported that the shut in gas production equaled 49.14% of the GOM’s daily gas production, which is approximately 12.3 Bcf/d. Shut in oil equated to 77.63% of daily GOM production, which is approximately 1.7 million b/d.

The survey of 65 producers found that the evacuations are equivalent to 75.26% of the 764 manned platforms and 58.97% of the 117 rigs currently operating in the GOM.

Turning attention to the Energy Information Administration’s natural gas storage report, most industry estimates are calling for a build within the 80 to 100 Bcf range when the report is released Thursday morning. Whatever the storage injection might be for the week ended Sept. 10, it will be closely compared to last year’s 101 Bcf build and the 81 Bcf five-year average injection.

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