The choice over whether to buy or sell natural gas futures was an easy one to make Wednesday morning. Confronted with a tropical storm that had not strengthened as expected overnight, traders elected to sell the market with a vengeance, pushing the October contract to its lowest level since last Tuesday. Creating a whopping 13-cent gap on the daily bar chart, the October contract started its penultimate trading session by opening well into negative territory. After stabilizing briefly during the late morning, the prompt month was hit with another wave of selling in the afternoon. It finished at $3.494, down 24.8 cents for the day.

According to the National Hurricane Center, Tropical Storm Isidore was expected to make landfall over the Louisiana coast early this morning. Although some strengthening was forecast, it was not clear as of press time last night whether the storm would regain hurricane status before striking land. Prior to hitting the Yucatan Peninsula over the weekend, Isidore was a formidable category 3 hurricane with maximum sustained winds of 125 mph. It was thought that once the storm emerged back in the Gulf of Mexico, Tuesday it would re-intensify into a category 1 or possibly category 2 hurricane.

But what Isidore lacks in intensity, it makes up for with its sheer size. “Isidore is a large storm with the circulation covering much of the Gulf of Mexico. Tropical storm force winds extend outward up to 315 miles… mainly to the north of the center,” the NHC wrote in a 4 p.m. EDT update Wednesday.

And although the storm is unlikely to cause any destruction that would affect supply for a prolonged period of time, its impact in the short-term is profound. According to the Minerals Management Service (MMS), nearly all the estimated 14.6 Bcf/d Gulf gas production is shut in because of 21-foot waves/swells, high winds and rain. Remote operations often continue from some platforms, all of which have been evacuated (see related story this issue).

Looking ahead to expiration Thursday, Jay Levine of New Hampshire-based Advest Inc, sees good support for October futures at $3.47. A break of that level could lead to a retest of the bottom of the recent uptrend channel down to $3.37, he reasoned. “If I had to guess, I would look for a little follow through in the morning and then a [short-covering] rally into expiration. In November futures, I am a scale in buyer from $3.79 down to the low $3.60s.”

Tom Saal of Pioneer Futures in Miami is also cautiously bullish moving forward, if and only if the October contract can close above the September contract’s finally resting place at $3.288. “Looks like we held above September. Regardless of what the storm did and didn’t do, as long as October holds on to settle above September, we are still in an uptrend…. the market made a new high on the move to $3.99. The bull trend is intact. After Oct expires, I still recommend buying the dips,” he reasoned.

Updated Energy Information Administration storage data will be released today at about 10:30 a.m. EDT. Expectations ahead of that report call for a net injection of 61 Bcf to 77 Bcf, which will be on the low end of historical comparisons. Last year, the Energy Information Administration estimated a 93 Bcf refill and the five-year build averages 73 Bcf.

©Copyright 2002 Intelligence Press Inc. All rights reserved. The preceding news report may not be republished or redistributed, in whole or in part, in any form, without prior written consent of Intelligence Press, Inc.