After pressuring prices lower ahead of the weekend, natural gas futures traders bid the market back up Monday in reaction to forecasts calling for Isidore to re-strengthen as it moves off the Yucatan Peninsula into the warm waters of the Bay of Campeche. Buying was seen in two distinct surges. Prices bubbled steadily higher throughout the morning and then spiked at the closing bell. The October contract finished at $3.978, 22 cents higher for the day and just off its new 15-month top at $3.99. The November contract, which will become the prompt contract after October goes off the board Thursday at 2:30 p.m. EDT, finished 18.3 cents stronger at $4.175.

While it’s still possible that Isidore will weaken too significantly to re-intensify once it re-emerges in the Gulf, producers were not taking any chances. As of Monday at about noon, non-essential personnel from 169 platforms and 47 rigs had been evacuated from the U.S. Gulf of Mexico, and shut-in volumes had reached 3.2 Bcf/d of gas and 64,000 bbl/d of oil. Those figures were considerably above the MMS’ last report Friday of evacuations affecting 19 platforms and 12 rigs out of a total 4,035 platforms operating in the Gulf, and about 2.5 MMcf/d of production shut in (see related story this issue).

From a production standpoint, Kyle Cooper of Salomon Smith Barney believes that a more westerly storm track would be the most bullish scenario. “With the strongest winds on the northeast corner of the eye, a track between Corpus Christi and Houston would probably curtail a great deal of production all the way to New Orleans,” he wrote in a note to customers Monday.

However, unlike last week, Isidore was not the only game in town Monday. Also appearing on traders’ radar yesterday were Tropical Storm Kyle which is expected to curve around to the south of Bermuda, and Tropical Storm Lili, which is approaching the Caribbean Islands from the East. Based on ensembles of potential atmospheric flow, New York-based Weather 2000 believes it is possible that within the next 5-10 days we could have three named storms in the broad vicinity of the Eastern Gulf/Gulf Coast/Southeast/Florida/Bahamian Sea/Western Caribbean.

And while cautious that the market could continue higher in reaction to updated forecasts, Jay Levine of New Hampshire-based Advest Inc, believes there may exist an opportunity to make some money shorting this market at these levels. “With [natural gas] Access currently trading at the psychologically significant $4.00 level and crude also around its regular session highs in the $30.90 area, both are trading at the extreme top of their respective uptrend channels,” he wrote in a note to clients Monday evening. “I’d still hold short positions…but would also have some upside protection [in the form of] long calls,” he continued.

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