While petroleum futures decisively explored lower on Tuesday following the Labor Day Holiday weekend, October natural gas was a little more undecided as traders began to monitor Tropical Depression 16 (TD 16) off the coast of Florida. After venturing both higher and lower during the course of the day, prompt month natural gas ended up settling 3.4 cents lower for the session at $11.657.

October natural gas dipped down in morning trade on Tuesday to record a low of $11.460. However, a late rally pushed the contract up as high as $11.800 before it slipped lower to its close.

With news late last week that the International Energy Agency excluding the U.S. will release 30 million barrels of gasoline and other refined products to help alleviate the strain created by Hurricane Katrina, petroleum futures on Tuesday shed some excess weight.

October gasoline — which was as high as $2.45/gallon last Thursday — continued to sift lower on Tuesday, closing down 12.87 cents at $2.0550/gallon. Likewise, October crude settled $1.61 lower at $65.96/bbl, while October heating oil closed at $2.0543/gallon, down 3.68 cents on the day.

“There is the possibility of Tropical Depression 16 just off the coast of Florida developing into another hurricane and getting into the Gulf,” said Ed Kennedy of Commercial Brokerage Corp. in Miami. “It is really eerie how much this one could be like Katrina if some forecasts are right. Natural gas is too critical at this point; no one is going to touch the market on either side here. Everyone is going to stay on the sidelines.”

As of 5 p.m. EDT, the National Weather Service’s (NWS) National Hurricane Center said TD 16 remained “poorly organized,” about 175 miles southeast of Cape Canaveral, FL.

“The National Weather Service is saying the storm’s path will take it up the coast of Florida into Georgia or South Carolina, while a number of the independent forecasters are calling for it to track more like Katrina by traversing over the Florida Peninsula and into the Gulf of Mexico, where it will develop,” Kennedy said. “There really is a significant level of uncertainty because the National Weather Service is saying one thing and the independent forecasters are saying another.”

On Tuesday afternoon, AccuWeather.com said TD 16 should drift generally to the northwest. “This depression should continue to strengthen as well and the main impact the next day or two will be heavy rain, mainly along the east coast of Florida over the next several days,” AccuWeather.com said. “The depression combining with a strong ridge of high pressure across the northeastern United States will also result in strong northeast winds, high surf and rip currents along the east coast of Florida and the Southeast coast over the next few days. Later this week or over the coming weekend, this system could end up in the eastern Gulf of Mexico as high pressure is expected to build to the north turning the steering winds more to the west.”

Kennedy noted that if the NWS forecast is right then there is no threat to the rigs. “If the storm does get into the Gulf and follow the path up the mouth of the Mississippi, we’ve got a problem folks of national proportions,” he said. “I don’t know who is right, but let’s hope the National Weather Service is.”

Natural gas weather bulls should be in good shape this week. According to AccuWeather.com, a vast area from Texas north to New England and north to Montana should experience above normal temperatures over the next five days. Only the West Coast is forecast to be below normal.

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