After putting in a price bottom at the end of July, natural gasfutures have moved steadily higher throughout the month of Augustas traders priced a hurricane premium into the market. Theirconcern is that a supply disruption in a market that already sportsa tight supply-demand equilibrium could mean serious problemsheading into the crucial winter demand months.

Yesterday those concerns received a good bit of validation. Hername is Debby.

Although she had not yet had hurricane status conferred upon heras of press time last night, Tropical Storm Debby was located about165 miles east-southeast of Antigua and moving toward the west atthe speedy clip of 22 mph, according to the National HurricaneCenter. A combination of Tropical storm and hurricane warnings werein effect last night for the Leeward Islands, Virgin Islands,Puerto Rico and Dominica. Some strengthening was expected overnightand the NHC said that created the possibility the storm would reachhurricane status by Tuesday morning.

While it is still too soon to tell what if any effect the stormwould have on gas production in the Gulf of Mexico, traders werenot taking any chances yesterday. After gapping 7.5 cents higher atthe open, the September contract glided effortlessly higher astraders liquidated shorts and loaded up on fresh long positions.September posted the largest gain of any month, rising 31.1 centshigher to close at $4.747. In doing so it easily set a new all-timehigh for a spot month at Nymex at $4.76. But the prompt month wasnot alone. Proving the market’s fear of the impact a Gulf stormcould have on the supply of natural gas this winter, the Nov.-Mar.winter strip rose an impressive 23.1 cents to $4.656.

For Fred Gesser, a hurricane forecaster with Pennsylvania-basedWeatherMarkets.com, the storm should be taken seriously, not onlyby people in along the forecasted track, but also by the naturalgas market. “As recently as [Monday] morning, forecasts werecalling for Debby to turn gradually to the northwest and toward theBahamas, but now models are calling for a continuation westwardalong the northern fringe of Hispaniola and Puerto Rico. On thecurrent track, Miami and then the Gulf of Mexico is in harm’s way,”he warned.

And if the storm comes ashore in southern Florida, it will have atleast one thing in common with another storm that Gesser had thedispleasure of forecasting back in 1992. “After Hurricane Andrew, Iwanted to quit forecasting” he said of the 1992 storm that ranks asthe worst natural disaster in U.S. history For a detailed account ofHurricane Andrew please visit the NHC archives at:https://www.nhc.noaa.gov/1992andrew.html NGI’s coverage of thestorm’s impact on the natural gas idustry is available here.

If the storm gains access to the Gulf of Mexico, where its paththere is still a large uncertainty. “I wouldn’t expect SouthFlorida to slow it down that much. There is too little land tocause it to lose its intensity,” Gesser continued. “The bigquestion is where the high pressure will be set up. If the highpressure stays where it is, the storm will continue across the Gulfto the west and hit somewhere in the vicinity of Brownsville,Texas. However, if the high pressure moves to the east, the stormcould be forced to the north and into the Mississippi River Delta.”

The later scenario would be far more devastating to natural gasproduction assets in the Gulf, much of which is centered in theMobile Bay Area of Alabama. Hurricane Andrew, which caused up to abillion dollars damage to natural gas rigs in the Gulf, struck landnear Mobile Bay, in southeastern Louisiana. However, in order forDebby even to have a chance to make landfall on U.S. soil, it willfirst need to strengthen and that may be difficult, says Gesser,who notes that the storm’s low-level circulation is disjointed fromits upper level circulation.

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