After taking Tuesday to consolidate following Monday’s $1+ run-up, natural gas bulls were at it again Wednesday morning on renewed concerns about Tropical Storm Chris’ path and strength. Traders pushed September futures to a new regular session high for the move of $8.545 in morning trade before the contract drifted lower in the afternoon to settle at $7.799, still good for a 22.5-cent gain on the day.

Wednesday’s strength was attributed to continued heat across the country combined with the increased possibility that Tropical Storm Chris could reach hurricane status and potentially find its way into the Gulf of Mexico.

One broker noted that it was like the natural gas trading pit had had “50 cups of coffee” Wednesday morning, adding that the market appeared to be “wired.” After gapping significantly higher to open Wednesday morning at $8.220, the prompt month quickly put in its $8.545 morning high before dropping into the afternoon.

On the storm front, the National Hurricane Center (NHC) said Wednesday afternoon that Tropical Storm Chris had weakened a little, but could strengthen over the next 24 hours and could become the first hurricane of the 2006 season. A hurricane watch has been issued in the southeastern Bahamas and the Turks and Caicos Islands. The NHC reported that the storm’s top sustained winds dropped from 65 mph to 60 mph. Potential storm paths show the storm anywhere from south of Cuba to Florida by late in the weekend. As of Wednesday afternoon, the storm was headed west-northwest at 10 mph.

“The bulls are really holding all of the cards right now with the heat and storm concerns. Those concerns are not going to go away easily,” said Steve Blair, a broker with Rafferty Technical Research in New York. “The market is really crazy right now. This whole push higher was initially started by forecasts for serious heat and the withdrawal in storage in last week’s report, which is almost unprecedented for July.

“That got the ball rolling and by last Friday, reports of a storm brewing in the central Atlantic reinforced the bullish sentiment,” he added. “We came in on Monday and the market ran higher. On Tuesday, we had a sell-off of a pretty big magnitude as doubts about Tropical Storm Chris’ path and strength flooded the market. I heard there was quite a bit of fund activity, so it simply could have been taking profits on a big move. On Wednesday, the market took off again as the storm’s path started to possibly include the Gulf of Mexico and expectations were that it would now turn into a hurricane. So I think we saw a lot of people — including the funds — who probably bailed on some of their positions to take advantage of an inflated market, resetting their positions for the next move up.”

As for the easing lower Wednesday afternoon, Blair said some more profit taking probably came in. “I think the market came down Wednesday afternoon on a lot less volume than it went up on,” the broker said. “Reports from the floor in the afternoon were that things were fairly quiet. I think this market is going to continue to take its direction from Chris and what it becomes or doesn’t become. The heat is another supportive factor. It’s not out of the realm of possibilities that we see another storage withdrawal Thursday morning.”

Meteorologists point out that although Chris is currently a robust tropical storm, water temperatures will play a key role in its development. “Over the next two or three days, he could grow in strength,” said AccuWeather meteorologist Bob Tarr. He said the water that is fueling Chris right now is right around 80 degrees, and tropical systems need warm water to survive. “While 80-degree water is warm, it isn’t enough to support a strong hurricane,” he said. “However, Chris is forecast to move into an area with water temperatures as warm as the upper 80s on Friday.” Tarr said that if Chris can avoid interaction with the mountains of Puerto Rico and Hispaniola and if wind shear is low, “we could see a much stronger storm by the time the weekend arrives.”

Analysts aren’t ready to make a call if Chris will enter the Gulf of Mexico. “I’m not sure of the likelihood that it [Chris] will do any damage to Gulf of Mexico installations, but it reminds people that it was almost exactly a year ago that Hurricanes Katrina and Rita hit the U.S.,” said Matthew Parry, economist at Moody’s Economy.com.

New York-based Weather 2000 said Wednesday afternoon that not only does it expect Chris to reach hurricane status, it places the odds of the storm entering the Gulf of Mexico at 75%, either via the Straits of Florida or via Cuba or Florida traversal. “Our research concludes that Chris would enter the Gulf of Mexico basin in the Sunday-Monday time frame,” Weather 2000 said. “At the expense of comparing Chris to a historical hurricane, it should be pointed out that Chris will be following closely in the path footsteps of Rita last year.”

With Chris coming as the third named storm of the year, Weather2000 pointed out that there had already been seven named storms by this date in 2005, and only one in 2004. “We climatologically see the third named storm of the season classified by August 11th, so we are once again ahead of pace,” the forecaster said.

Looking at Thursday morning’s natural gas storage report for the week ended July 28, industry expectations are a lot closer in range than they were last week, when the market was surprised with a 7 Bcf withdrawal. According to a Reuters survey of 21 industry players, working gas is expected to have risen by approximately 19 Bcf when the Energy Information Administration releases its report at 10:30 a.m. EDT Thursday.

Golden, CO-based Bentek Energy said it expects an 18 Bcf injection to be revealed, with 22 Bcf injected into the East region, 5 Bcf injected into the Producing region and 9 Bcf withdrawn from the West region. The ICAP derivatives auction, held after the close of Nymex floor trading Wednesday, revealed a consensus build expectation of 10.35 Bcf.

The number revealed Thursday morning will also be compared with last year’s 37 Bcf build for the week and the five-year average injection of 62 Bcf.

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