After dipping to new three-day lows early in the session, natural gas futures roared back to life yesterday as traders hedged for the possibility that Hurricane Lili could knock out a portion of Gulf Coast production for more than just a few days. After covering a wide, 24.5-cent trading swath, the November contract closed at $4.16 yesterday, up 9.3 cents for the session and just 4 pennies off its high on the day. At 102,851, estimated volume was light, considering the expanded trading range.

On Tuesday, the market funneled lower in reaction to some conflicting hurricane strike and intensity predictions from the various forecasting agencies. However, Lili collected herself overnight and left forecasters with no doubt by mid-morning Wednesday. Reading like a rap sheet of a criminal you don’t want to mess with, Lili’s credentials were undisputable: After achieving “major hurricane” category 3 status marked by 120 mph sustained winds at 11 a.m. EDT, according to the National Hurricane Center, the storm quickly intensified to 135 mph category 4 status by 2 p.m. EDT. That prompted the NHC to implore people in the hurricane warning area from High Island Texas to the mouth of the Mississippi River to rush to completion “all preparations to protect life and property.”

However, the storm’s greatest indictment, at least as far as the natural gas market is concerned, was that it shut down the Henry Hub yesterday morning. Hub operator Sabine (ChevronTexaco) sent a notice to all shippers Wednesday saying that there would be no onsite personnel and no compression for at least the next 48 hours. All receipts and deliveries nominated from Oct. 2 going forward were subject to being cut. “Intraday and non-timely nominations will only be accepted with prior approval by Sabine Pipeline and will be scheduled on a best-effort basis until further notice.”

With the storm not forecast to strike the Louisiana coast until about 1 p.m. EDT, traders will have time this morning to square their books or initiate fresh positions. And while it is certainly of depreciated importance in light of the impending storm, the weekly storage report due out at 10:30 a.m. EDT is likely to be a quick diversion for traders. Taking into account the estimated 25 Bcf that Isidore knocked off the market last week, market watchers and traders are looking for a 35- 45 Bcf injection. Last week the Energy Information Administration said that 67 Bcf was added during the week ending Sept. 20 and last year the market added an estimated 68 Bcf to underground gas reserves.

In daily technicals, November confirmed support Wednesday in the $3.947-955 area, according to Tim Evans of New York-based IFR Pegasus. And while he wouldn’t bet on it breaking support there today, he looks to use a $3.91 sell stop to move into a 100% short position basis November. A buy stop at $4.07 would limit his losses.

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