A 69 Bcf weekly storage injection and a rapidly strengthening tropical storm rumbling toward the Gulf of Mexico were enough to send natural gas futures higher Thursday morning as traders loaded up on long positions. The October contract gapped higher for the second session in a row and peaked at $3.97 moments after traders learned that the storage increase last week fell slightly short of expectations, the prior week’s injection and the injection reported during the same week last year. At 11 a.m. EDT, the October contract was 11.3 cents higher on the day at $3.90. It closed 6.9 cents higher at $3.856.

The Energy Information Administration said that working gas in storage rose to 2,924 Bcf in the week ending Sept 13. Stocks were 160 Bcf higher than the same time last year and 304 Bcf above the five-year average of 2,620 Bcf. In the East Region, stocks were 90 Bcf above the five-year average following net injections of 45 Bcf. Stocks in the Producing Region were 151 Bcf above the five-year average of 692 Bcf after a net injection of 20 Bcf. Stocks in the West Region were 64 Bcf above the five-year average after a net addition of 4 Bcf.

At 69 Bcf, the injection fell short of last week’s 74 Bcf build as well as the 70 Bcf expected by market participants. Versus last year’s 91 Bcf addition and the five-year average injection of 78 Bcf, the weekly refill also was on the bullish side.

However, the modestly bullish storage report was not the main feature of trading Thursday. Of much greater concern was the continued development of Isidore, which officially became the second hurricane of the 2002 Atlantic Hurricane Season Thursday afternoon. Packing maximum sustained winds of 75 mph, Isidore was heading toward the west-northwest at 9 mph Thursday evening. On this course, it will cross over western Cuba and gain entrance into the Gulf of Mexico late Friday through early Saturday, says Jeffery Shultz of New York-based Weather 2000. “And while we cannot say with any confidence if, when or where Isidore will make landfall next week, we do know that it will continue to intensify and will likely be a category 3 hurricane (maximum sustained winds of 130 mph) with a very developed eyewall in two to three days,” he said.

“The exact path of Isidore beyond Cuba remains very uncertain. An analogy to Isidore in the Gulf would be a water balloon in a pool: there are very few significant steering currents, so the storm will likely drift or float rather erratically. Even a velocity in excess of 10 mph could still have sudden zig-zags or periodic stalling,” Weather 2000 wrote in a daily alert to its customers. “Our research indicates that if Isidore has a West or West-NorthWest vector of motion when it crosses 23.5 [degrees North Latitude], then the Mexico Campeche Coast and Texas and Western Louisiana are strong possibilities of an eventual land strike; if Isidore has Northwest or North-Northwest vector of motion when it crosses 23.5, then New Orleans and Eastward become stronger possibilities of land strikes.

“I don’t see anything yet,” half-joked Tom Saal from his vantage point at the offices of Pioneer Futures in Miami. “This market needed a fundamental stimulus to get it out of its recent trading range and that is exactly what Isidore has done.” Saal went on to suggest that the storm came at a time when the market was very susceptible to being jostled in one direction or the other. “The funds were just about flat as of the last Commitments of Traders report. They had taken all their money off the table, and were ready to re-deploy that capital at the first opportunity. Isidore was that opportunity.”

While impressed with Isidore’s formation, Saal is not totally convinced that traders will have the gumption to hold their longs over the weekend. It is for this reason that he would be a seller at current levels on Friday. “Cash out now, you can always buy it back on Monday,” he reasoned.

©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.