After gapping higher at the opening bell, natural gas futures extended to new four-month highs Wednesday as traders grappled with the possibility that Tropical Storm Isidore, which was upgraded from Tropical Depression 10 Tuesday night, would intensify on its path toward the Gulf of Mexico. The buying was seen in two distinct waves. The first surge culminated with a $3.85 high yesterday morning. After a brief sell-off, bulls were at it again in the afternoon. Light profit-taking trimmed the market’s gains and left the October contract 6.3 cents off its high for the session. However, at $3.787 the prompt month was 10.8 cents higher for the day.

As of 5 p.m. EDT Wednesday, Tropical Storm Isidore had maximum sustained winds of 60 mph and was moving northwest at 9 mph after having soaked and lashed Jamaica for much of the day, the National Hurricane Center said. Further strengthening is expected, and the NHC expects Isidore to reach hurricane status with maximum sustained winds of 74 mph by Thursday afternoon.

“This is a very scary storm,” said private forecaster Michael Schlacter of New York-based Weather 2000. All evidence suggests that Isidore will be at least a Category 1 hurricane when it enters into the Gulf of Mexico either late Friday or early Saturday. The only question that remains is whether it will turn to the north and hit land in the eastern Gulf or whether it will stay on a path toward New Orleans or points farther west.

It’s difficult to know the route of the storm because the direction will be dictated by the prevailing weather patterns in the United States once the storm crosses the Tropic of Cancer at 23.5 degrees north latitude, said Schlacter. “It is just too far out to know what pattern will be in control at that time. If I had to guess, I would say that Isidore will likely hit somewhere from New Orleans eastward.”

If he is right, it will be the first time a hurricane has hit the U.S. mainland since Irene in October of 1999. Going further back, Schlacter referred to Hurricane Danny in 1985 as the last storm with a similar origin, track and (expected) destination. Since that time, there have been several hurricanes that have affected gas production in the Gulf of Mexico, including Category 3 Bret in 1999, which knocked 531 MMcf/d offline and Category 3 Opal, which spun its way into the central Gulf back in early October of 1995, curtailing as much as 9 Bcf/d or nearly 70% of Gulf production. The most devastating was Hurricane Andrew in 1992, which shut in nearly all 14 Bcf/d of Gulf of Mexico production for at least a day and created devastation that had a long-term impact on about 2.5 Bcf/d (see NGI’s Hurricane Andrew archives at intelligencepress.com under special reports).

Ed Kennedy of Pioneer Futures in Miami, who is watching the development of Isidore for both personal and professional reasons, believes the profit-taking will not come until there is an “all clear” message to the natural gas rigs in the Gulf of Mexico. “Until then, the short sellers will be kept at bay,” he reasoned.

However, the market will take its eye off the ball briefly tomorrow when fresh storage injection data is released by the Energy Information Administration. Expectations are centered on a 70 Bcf injection, which would fall short of last week’s 74 Bcf refill as well as last year’s 91 Bcf injection. Kennedy is expecting a 66 Bcf addition.

©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.