Natural gas futures were trading slightly higher early Tuesday as Hurricane Sally, hovering just off the northern Gulf Coast, forced production shut-ins and threatened to cause “historic flooding” in the region. The October Nymex contract was up 1.1 cents to $2.321/MMBtu at around 8:40 a.m. ET.

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The National Hurricane Center (NHC) warned early Tuesday that Sally could deliver “historic flooding” and “extreme life-threatening flash flooding” over areas along the northern Gulf Coast through Wednesday.

As of 8 a.m. ET, Sally was about 65 miles east of the mouth of the Mississippi River and moving northwest at 2 mph, according to forecasters.

Sally was expected to continue moving northwest Tuesday morning before turning northward in the afternoon. A “slow north-northeastward to northeastward motion” was expected Tuesday night into Wednesday, according to the NHC.

As Sally has threatened energy interests in the Gulf of Mexico, production has dropped 770 MMcf/d since Saturday, according to estimates from Genscape Inc. Several pipelines have announced evacuations and flow restrictions amid the storm’s arrival in the region, the firm said.

“Most notably, Destin announced that the Pascagoula Gas Plant was shutting down along with a notice from Mississippi Canyon announcing the same for the Targa Venice Gas Plant due to the storm,” Genscape analyst Dan Spangler said in a note to clients early Tuesday. “Dauphin has also announced that the pipeline would be operating at a reduced capacity.

“…On the demand side, scheduled gas deliveries to Chevron’s Pascagoula refinery on the Mississippi coast dropped Monday, implying that the facility could be shutting down. The nearby 150 MMcf/d Victor J. Daniel Jr. power plant could also be shutting down as gas deliveries have dropped by half.”

Looking at the recent natural gas price action, the front month got a boost Monday from recent strengthening in liquefied natural gas (LNG) feed gas flows. However, there are a number of factors that could see the October contract continue to test support in Tuesday’s trading, according to analysts at EBW Analytics Group.

“With weather-driven demand for gas near its lowest level of the year, Cameron LNG still shut down, and a string of large injections expected over the next few weeks, support near $2.280 is likely to be tested again today,” the EBW analysts said. “Further declines are still possible. Yesterday’s trading suggests, however, that the downside price risk may be more limited than it appeared to be before this past weekend’s feed gas increase at Sabine Pass.”

Limited regional storage flexibility remains a potential factor for the market as the end of the injection season approaches, according to Bespoke Weather Services.

“Storage is running at record levels in some regions, including in the South Central, most important for Henry Hub, and weather is not helping the bulls much, as we are looking at below normal demand at a time of year when demand typically runs low anyway,” Bespoke said. “The fundamental backdrop remains more bullish for winter versus the front of the curve, though price action all around likely remains volatile.”

October crude oil futures were up 49 cents to $37.75/bbl at around 8:40 a.m. ET, while October RBOB gasoline was up fractionally to $1.1139/gal.