Proving that Hurricane Ivan’s lasting effects on Gulf of Mexico production didn’t go unnoticed by traders, the October natural gas futures contract on Tuesday spent the day exploring resistance levels following its gap higher at the open.

After trading higher in overnight Access trading, futures on Tuesday ran up to a high of $5.64 late in Tuesday’s regular session before closing at $5.608, up 35.9 cents on the day.

Despite early predictions last week that Gulf production would return quickly following Ivan, the Minerals Management Service (MMS) reported Tuesday that there is still 2.8 Bcf/d of natural gas shut in, equating to 22.7% of the Gulf’s 12.3 Bcf/d production. To date, Ivan has forced the shut-in of 36 Bcf of Gulf production. Thirty-five platforms and one rig are still evacuated, according to 18 companies reporting to the MMS.

The agency Tuesday reported more platforms missing and pipelines damaged, adding it expects more reports to trickle in. Continued bad weather in the Gulf has hampered access to offshore stations (see separate story).

Steve Blair of Rafferty Technical Research in New York said Tuesday’s large up move in the futures market had to do with the Gulf shut-ins hitting at just the right time.

“There were a lot of technicals involved in this move in conjunction with the problems in the Gulf,” he said. “Platforms are expected to be down a little longer than they originally expected. I think it is a combination of the fact that the market just happened to be at some support levels when all of this happened. In addition, you had a very strong heating oil market today. I think part of the [boost] that natural gas was getting was coming from the petroleum sector.

“The one thing that is significant in the natural gas market is that we broke through our closest major resistance level in the $5.45 area and we have come close to our next major level in the high $5.60s,” Blair added.

Because the resistance levels were broken late in the day, the broker noted that it is possible that the market might see a little more follow-through to the upside while it awaits fresh news on the Gulf situation.

As the market awaits the Energy Information Administration’s Thursday morning release of the natural gas storage report for the week ended Sept. 17, many market watchers wonder what kind of impact Ivan could have on the storage situation.

“Even though storage numbers are high as we get into the end of September, this could put a little bit of a chink in the armor of getting to 3.2 Tcf if production continues to be curtailed to this extent,” Blair said.

With production losses from the Gulf continuing at a 2.8 Bcf/d rate, Tim Evans of IFR Energy Services said the shut-in rate is just about the volume needed to yield neutral storage numbers going forward. For the week ended Sept. 17, Evans is calling for an injection in the 75-85 Bcf range. “This is certainly bullish relative to where storage was projected to be without the storm-related losses, but it remains to be seen if the storage surplus will actually trend lower for any intermediate to longer-term span as a result,” he said.

Kyle Cooper of Citigroup is calling for a build between 58 and 68 Bcf, although he admits his confidence is low on the number because of the current Gulf production situation. He noted that questions about whether the loss of demand has been accounted for properly, or whether the MMS is accurate in its aggregation of shut-in figures make this week’s number anyone’s guess.

“Despite the lower injection this week, inventories remain on track to reach 3,200 bcf or above by the end of October,” Cooper said. “Weekly injections need to only average 47 Bcf per week until Oct. 29 to reach 3,200 Bcf. Obviously, we believe this week will still exceed that benchmark.”

Thursday’s storage number will be compared closely to last year’s 100 Bcf injection and the 82 Bcf five-year average build.

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