While Hurricane Ike began to pound the Texas coast Friday near Galveston and petroleum products and natural gas futures climbed on the day, front-month crude futures broke below the psychological $100/bbl mark for the first time in more than five months before settling higher as well. October natural gas futures finished the week at $7.366, up 11.8 cents from Thursday but 8.3 cents lower than the previous week’s close.

While October heating oil ended up gaining 2.36 cents to close at $2.9391/gal, October crude recorded a $99.99/bbl low before finishing Friday’s regular session at $101.18/bbl, up only 31 cents from Thursday’s close.

“We saw an awful lot of short-covering on Friday as traders tried to maneuver their positions ahead of Ike,” said Ed Kennedy of Commercial Brokerage Corp. in Miami. “This is a perfect storm for Houston. It is coming in exactly at the right angle with Galveston Bay and Texas City to its right. They are talking a storm surge of 20 to 25 feet…On top of the storm surge, they are talking 15- to 20-foot seas, so waves are going to be breaking on the third and fourth floor of buildings in Galveston and Texas City. Landfall is scheduled for 4 a.m. Saturday and high tide is expected at 5:26 a.m., so this really is the perfect storm, with the potential to do a lot of damage.

“The petroleum products were really strong on the day because there are 10 or 12 refineries near landfall. They are going to be underwater. While the product traders are paying attention, everyone is sort of dismissing this storm in the natural gas industry. The storm is only moving at 10 mph and there are 20- to 25-foot seas out in the Gulf, so forget about the wind damage, it’s the sea that does the damage to the rigs.”

Kennedy said he believes the recent price range in natural gas will hold until more is known about Ike’s impact. “We still appear to be trading between support at $7.010 and resistance up in the $7.60s. Until we find out the damage to energy infrastructure sometime [this] week, I think we’ll probably hold that recent trading range in natural gas,” he said. “We would need some fairly long-term shut-ins in order to change the current bearish perspective on natural gas storage levels. While prolonged shut-ins could make a dent in refill, you have to remember 2005. In the year of hurricanes Katrina, Wilma and Rita we still managed to fill storage. We always seem to.”

Some traders see the U.S. gas market as somewhat insulated from the gyrations of the petroleum complex and poised to find near-term support. “In spite of the lack of upside initiative this week, we are still leaving open the possibility of natural gas acquiring support relative to crude and heating oil going forward,” said Jim Ritterbusch of Ritterbusch and Associates. He added that much bearish news has been “discounted by this summer’s natural gas price plunge of almost 50%.” And he pointed out that “the domestic nature of the natural gas market should insulate it from the effects of a possible global recession or strengthening in the U.S. dollar, keeping it heavily reliant upon weather influences.”

Others see lower prices. “I think it’s supplies; I think it’s the recession; and I think demand has fallen off significantly, and all those things are having an impact on the market,” said George Ellis, director at Bank of Montreal in New York. “I see a $6 handle for natural gas. I look for a $5.50-6.50 trading range.”

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