Boosted by the bullish combination of hurricane fears and Gulf-area production curtailments, the natural gas futures market surged higher early Tuesday on waves of commercial and local-trader buying. After gapping higher at the opening bell, the September contract shot to a new one-week high at $5.96 as all eyes were watching the development of Tropical Storm (TS) Bonnie in the Gulf of Mexico.

However, by midday traders were shifting their attention from Bonnie in the Gulf to TS Charley in the Caribbean, and that lapse gave sellers the opportunity to take profits before the close. The September contract finished at $5.791, up 9.8 cents for the session but down nearly 17 cents from its early top. At 108,421, estimated volume was heavy for the session, indicative of speculative trading activity.

Although Tropical Storm Bonnie posed the more imminent threat and was garnering more attention Tuesday, traders were careful not to ignore Charley, located in the in the eastern Caribbean Sea. By traveling at a speed of roughly 24 mph, Charley was not only making better time than Bonnie but also is much bigger; its tropical storm-force winds of up to about 45 mph extended 105 miles from the center, the National Hurricane Center said. A Hurricane Hunter plane was scheduled to check out Charley late Tuesday afternoon.

“There is too much we don’t know about Charley,” said Ed Kennedy of Commercial Brokerage in Miami. “This thing could be a real doozy if it makes it straight into the Gulf.” For that to happen, Kennedy explained, the storm would need to chart a course between the Yucatan Peninsula and Cuba. “If it goes over western Cuba, that’s not such a big deal because of the relatively flat terrain. But if it veers more to the west and goes more across the mountainous Yucatan Peninsula, it could get chopped up.”

That uncertainty, Kennedy continued, has increased the nervousness of buyers this week. “On Monday, I suggested buyers may want to lock in at those lower levels. Many of them did and are happy to have done so.” However, Kennedy is not ready to endorse an all out buying free-for-all. “I still think this market will have a difficult time sustaining prices with a $6 handle.”

Looking past the bullish near-term tropical storm events, the market’s upside may be capped by an increasingly bearish storage situation. Kyle Cooper of Citgroup predicts a 67-77 Bcf build in Thursday’s gas storage report will keep the industry on track to reach the hefty storage target of 3,200 Bcf by Nov. 1. “Although the cool temperatures have clearly been a primary driver this year, injections have also been considered bearish on a temperature-adjusted basis as well,” he wrote in a note to clients Tuesday.

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