Despite the intensification of Isidore to a category 2 hurricane Friday morning, natural gas futures shuffled lower throughout the session as traders liquidated long positions acquired during last week’s 50-cent price spike. At $3.758, the October contract was down nearly 20 cents from Thursday’s high and 9.8 cents lower on the day, but still 29.1 cents higher for the week. Volume was heavy for a Friday, with an estimated 97,137 contracts changing hands.

A few sources polled by NGI late last week said that the sell-off had been in response to Isidore’s west to northwest trajectory Friday, which put it on a course toward Mexico’s Yucatan Peninsula. However, forecasters at New York-based Weather 2000 Friday were reticent to predict a strike location for Isidore. Instead, the group called for continued erratic behavior, and likened Isidore’s direction to that of a water balloon sinking to the bottom of a swimming pool. “Extrapolating recent coordinates of the hurricane over the last 48 hours, and drawing oversimplified straight lines, would yield Gulf Coast target locations ranging from Brownsville, TX to Pensacola, FL,” the group wrote late Friday.

Looking ahead, Weather 2000 maintains that the crucial point will be when the storm crosses the Tropic of Cancer at 23.5 degrees north latitude. “Until it crosses that threshold, a Gulf Coast Strike location cannot be intelligently speculated. Furthermore, if by chance Isidore never…crosses 23.5 north, then the Bay of Campeche Mexican coast becomes the likely target. Either way, we believe 23.5 north holds the key here.”

And while the direction of prices this week will fluctuate with the ebb and flow of news and forecasts on Isidore, the magnitude of those price moves may be dictated by technical considerations. Thursday’s $3.95 top in October futures is the highest mark for a spot contract since June 2001 when the July contract was tumbling down from the market’s $10.10 peak in late 2000. If buyers are successful in pushing through $3.95, psychological resistance at $4.00, and the rising channel at $4.055, the next stop could be $4.44, says Tim Evans of IFR Pegasus in New York. On the downside, October came close to touching failed resistance (now support) at $3.70-71. Additional buying is likely in the $3.45-50 area, Evans continued.

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