MARKET WATCH Storm fears push up natural gas futures prices

Oil futures prices continued to increase Wednesday, while natural gas surged on the 5-10% possibility that Hurricane Isabel—a Category 4 storm in the southeastern Caribbean—might move into the Gulf of Mexico.

Sept. 11, 2003

3 min read

Sam Fletcher
Senior Writer

HOUSTON, Sept. 11 -- Oil futures prices continued to increase Wednesday, while natural gas surged on the 5-10% possibility that Hurricane Isabel—a Category 4 storm in the southeastern Caribbean—might move into the Gulf of Mexico.

Isabel was reported 650 miles east-northeast of the northern Leeward Islands early Thursday, moving west at 10 mph and maintaining a maximum sustained wind speed of 145 mph with higher gusts. However, the National Hurricane Center in Miami said it's too early to determine whether the storm will directly threaten other islands or the US.

Natural gas
The October natural gas contract jumped by 23.8¢ to $4.97/Mcf Wednesday on the New York Mercantile Exchange, "mostly on speculative fears of Hurricane Isabel," said analysts Thursday at Enerfax Daily. "The market opened up and steadily marched higher all day [Wednesday]. Large speculators hit buy stops above $4.81[/Mcf] about midday, and locals were forced to cover short positions [an excess of open sales vs. open purchases] as the market marched through last week's highs," they reported.

Meanwhile, the US Energy Information Administration reported early Thursday that natural gas injections into US underground storage totaled 97 bcf during the week ended Sept. 5. That's up from 70 bcf the previous week and 74 bcf a year ago and well above Wall Street projections.

"Last week, electricity demand was reported as quite low, indicating the possibility for a good-sized build" in the latest gas injection numbers, said Enerfax analysts.

US natural gas storage now totals nearly 2.5 tcf. But it is still short by 369 bcf from 2002 storage levels for the same period and down by 145 bcf from the 5-year average at this point.

Gasoline prices decline
Unleaded gasoline for October delivery slipped by 0.41¢ to 87.92¢/gal Wednesday on NYMEX, after escalating by 2¢/gal during the previous session on expectations that government and industry reports on US inventories this week would be bullish. Although rising gasoline prices helped pull up other energy commodities in recent sessions, that futures market was the only one to register a loss Wednesday.

Earlier this week, analysts at Merrill Lynch Global Securities Research & Economics Group, New York, reported that US retail pump prices for gasoline had fallen from the record high levels seen during the Labor Day holiday the previous week. "We expect to see a further pullback of 15-20¢/gal at the filling station over the next 6 weeks, reflecting the drop evidenced in the cash markets, which in turn stems from a dissipation for now of refining capacity pressures," they said.

The October heating oil contract gained 0.41¢ to 77.18¢/gal Wednesday on NYMEX. The October contract for benchmark US sweet, light crudes increased by 17¢ to $29.35/bbl, while the November position was up by 20¢ to $29.43/bbl.

In London, the October contract for North Sea Brent oil gained 15¢ to $27.52/bbl Wednesday on the International Petroleum Exchange. The October natural gas contract continued its rally, up 3¢ to the equivalent of $3.11/Mcf on IPE.

The average price for the Organization of Petroleum Exporting Countries' basket of seven benchmark crudes increased by 8¢ to $26.52/bbl Wednesday.

Contact Sam Fletcher at [email protected]