While the entire petroleum futures complex saw large declines in a holiday-shortened trading session Friday, October natural gas futures ended up settling at $11.691, just 6.6 cents lower than Thursday’s settle but $1.885 greater than the previous Friday’s close. With small amounts of natural gas production returning to the Gulf of Mexico, questions as to the extent of the damages and the duration of shut-ins still remain.

Before the 1 p.m. EDT early close in observance of Labor Day on Monday, October natural gas saw a low of $11.550 and a high of $11.790. The commodity appeared to have missed the boat lower on Friday, which saw petroleum futures record significant losses.

It was a week of records. September natural gas futures expired on Monday at $10.847, an all time record expiration level. October natural gas set a new all time high of $12.300 in Access trading on Wednesday and a new all-time daily record settlement of $11.757 on Thursday.

Unleaded gasoline, which had been on a tear higher most of the week, appeared a little overdone on Friday. October gasoline dropped 22.53 cents on the day to close at $2.1837/gallon. October crude settled $1.90 lower at $67.57/bbl, while October heating oil settled at $2.0911, down 10.74 cents from Thursday.

The drop in petroleum futures prices was partially attributed to inventory releases. The International Energy Agency said Friday that all 26 IEA member countries collectively will make available to the market the equivalent of 2 million bbl/d of oil for an initial period of 30 days to help relieve the pressure created by lost production in the Gulf. The Bush administration will also offer 30 million barrels of oil for sale from the Strategic Petroleum Reserve.

While help was on the way for the petroleum sector, natural gas has no such reserve. “I think today was just the end of another torrid week of natural gas prices,” said Tom Saal of Commercial Brokerage Corp. in Miami. “They didn’t back off Friday. That’s about the only thing you can say. The market is just waiting for more information as to the extent of shut-ins.

“I think the market is assuming the shut-ins are going to go on for a while; that is why we are up here at these record price levels,” Saal added. “Either these concerns will materialize, or they will be proven to be an overexaggeration. It might not be quite as bad as people think, which would be bearish.”

While the market sorts out the long-term effects from Katrina, the other thing to keep an eye on is the second half of the Atlantic Basin hurricane season, the broker noted. “I believe Sept. 6 marks the top of the bell curve on hurricanes, which means the activity we have had over the past few months could be repeated,” Saal said. “We are definitely in the heights of the hurricane season.”

Forecasters William Gray and Philip Klotzbach of the Colorado State University (CSU) hurricane forecast team warned on Friday that with the season only half over and September being the most active storm month historically, there very well could be more mayhem in store for Florida and the Gulf Coast (see related story).

Commenting on the Gray and Klotzbach forecast, Steve Blair of Rafferty Technical Research in New York said he doesn’t believe that will change the market. “I don’t think that is any surprise to anybody, because they have been forecasting a heavier than normal storm season for the last two months. Everybody now has their eye out on the tropical low-pressure system out in the Central Atlantic. People will be paying close attention to that system to see if it becomes anything.”

As for the overall natural gas futures price level, Blair said he believes there is probably a limit on how much they can recede due to storm concerns. “I think there is a little bit of a floor in place, so I don’t think this market is going to come down real hard yet.” As for where that floor is, Blair said it remains to be seen. “Once we got above that $10.10 level, there is really nothing on a technical basis to give anybody any real idea of where real support in the market might be.”

©Copyright 2005Intelligence Press Inc. All rights reserved. The preceding news reportmay not be republished or redistributed, in whole or in part, in anyform, without prior written consent of Intelligence Press, Inc.