After numerous dress rehearsals during this 2008 Atlantic hurricane season, Hurricane Gustav’s predicted path could land the system squarely into the oil and natural gas patch of the Gulf of Mexico as a Category Three hurricane on Saturday or Sunday. The news was enough to light a fire under natural gas bulls, who pushed the September contract higher on Tuesday to close at $8.278, up 45.3 cents from Monday’s finish.

Petroleum futures also were higher on Tuesday in response to the Category One hurricane, but not by as much as one might think, especially in crude. October crude gained $1.16 to close at $116.27/bbl, while September heating oil jumped 5.85 cents to close at $3.2099/gal.

“We’ve had a quiet hurricane season so far with respect to threats to the Gulf of Mexico, but it appears Gustav could be the real deal, and traders are treating it as such,” said Steve Blair, a broker with Rafferty Technical Research in New York. “The National Hurricane Center has this thing tracking into the Gulf on Saturday or Sunday, but other models have it taking a more southerly track across the Yucatan Peninsula. No one is really sure yet. Forecasters are tracking a weather system that is coming out of the United States that could affect Gustav’s path. The market is certainly reacting here. There was a strong amount of short-covering going on again on Tuesday. You have to remember that Gustav took a lot of people by surprise. It went from a tropical wave to a tropical depression to a hurricane in less than 24 hours.”

From a technical perspective Blair said his firm had resistance at $8.220 and then $8.340. “We penetrated $8.340 but did not close above it,” he said. “Beyond that we have resistance at $8.890. However, this whole storm thing is going to dictate things now. Every update and tweak to Gustav’s path will now affect the market.”

As for trading strategies, Blair said people should “play the storm.” He noted that prices were comfortable on the downside over the past few weeks, but it was well known that any storm that came through would boost prices. “Where Gustav finally winds up will make a major difference in what this market does. If the model starts saying the hurricane is tracking more southerly, I think prices will drop back into the $7 area very quickly,” he said. “However, if it targets Texas or Louisiana, then we are going to continue to see these fairly significant jumps. If Gustav heads toward U.S. Gulf energy interests, I have no doubt that we’ll get well above $9.”

“A rapidly strengthening Hurricane Gustav could become the first major hurricane in the Gulf of Mexico since Hurricane Wilma in 2005,” according to meteorologists at “The potential for Gustav to become a major hurricane over the next four days depends primarily on two factors: how close it tracks to Cuba and the interaction it has with the island.”

The forecasting firm said if Gustav is “able to thread the needle” through the Yucatan Channel into the Gulf of Mexico, it could intensify to Category Four or Five strength over the warm water in the Gulf.

“The longer Gustav stays over the warm water in the Caribbean, the stronger it gets and the greater the chance that it will become a Category Three hurricane by Saturday,” said John Kocet, a senior meteorologist with “The storm will weaken if it moves close to Cuba, but it will strengthen if it tracks farther south across the Caribbean.”

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