September natural gas futures opened significantly lower Monday morning as Hurricane Ernesto was downgraded to a tropical storm and forecasts were calling for a more northerly trajectory taking it away from Gulf of Mexico oil and natural gas fields. Maintaining its overnight losses throughout Monday’s session, the September contract, one day ahead of expiration, closed at $6.472, down 68.5 cents from Friday.

The disappointment of Ernesto’s northward trajectory was enough to take the wind out of the prompt month’s sails. With the Gulf of Mexico presumably out of harm’s way, September natural gas reached a low of $6.320 on Monday.

“Anytime natural gas futures are down 10%, that will cause some ripples for the market,” said Jay Levine, a broker with enerjay LLC. “The market put a lot of weight on Ernesto getting into the Gulf of Mexico. This time, it looks like natural gas futures dodged a bullet. Traders bid up futures late last week, but when it [storm threat] failed to materialize it disappointed the market and down we came.”

Despite the drop, Levine said the bullish case still has legs. “I am still not counting this market out, even though we are still burdened with ample natural gas supplies,” Levine told NGI. “Longer term, I think bulls have a lot going for them. We have entered the peak of the hurricane season, so it certainly bears watching. As for now, I would deem the size of Monday’s pullback an exaggeration.”

After downgrading Ernesto to a tropical storm, the National Hurricane Center (NHC) said it expects Ernesto to hit southern Florida early Wednesday and move north.

A Bloomberg survey of 18 industry observers conducted Aug. 23, before the NHC predicted Ernesto would go on a more northward track toward Florida and miss Gulf producing areas, revealed that nine people believed natural gas prices would decline this week. Seven said prices will climb, and two predicted little change.

Joe Bastardi of AccuWeather forecasted that “Ernesto [would] be back over the water by 2 p.m. EDT (Monday) as it will reform quickly on the north side of the island of Cuba.” He added that the upper low north of Ernesto is distorting the outflow, but by Tuesday afternoon, as the storm is approaching southeast Florida, “there is potential for rapid development.”

Bastardi says that his model of choice for predicting hurricanes is the European, and “slowly but surely the model is coming around to the idea that big cool highs coming off New England with troughs buckling behind are a problem.” He predicts that Ernesto should move north up the coast as a large spreading out hurricane early next week. “The other option would be a turn east under the high pressure, but that appears to be less of an option now,” he said.

Bulls can’t get a break. Temperature forecasts call for mild weather and a normal to slightly below normal accumualtion of cooling degree days (CDD). The National Weather Service says that New York, New Jersey and Pennsylvania should see 28 CDD for the week ended Sept. 2, or three below normal. The industrialized states of Ohio, Indiana, Michigan, Illinois and Wisconsin should experience 30 CDD, or normal for this time of year.

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