Natural Gas Gains as Tropical Storms Threaten Gulf Production

By Reg Curren

Aug. 29 (Bloomberg) -- Natural gas in New York rose as Tropical Storm Gustav prompted producers to evacuate workers from oil and natural gas platforms in the Gulf of Mexico.

The projected track of the storm takes Gustav over the Gulf coast energy region by Sept. 2. Gulf platforms produce 1.3 million barrels of oil and 7 billion cubic feet of gas a day. The storm and evacuations may reduce the flow of gas from the Gulf, which accounts for about 14 percent of U.S. supplies.

``If there is damage from Gustav, we're clearly going to $10 or $12'' per million British thermal units, said Peter Linder, an analyst and senior adviser at DeltaOne Energy Fund in Calgary. ``At $8, this has a lot of legs to go higher.''

Natural gas for October delivery rose 19.6 cents, or 2.4 percent, to $8.246 per million Btu at 9:42 a.m. on the New York Mercantile Exchange. The price earlier rose 3.4 percent to $8.32.

The exchange is closed Sept. 1 because of the Labor Day holiday in the U.S. Electronic trading will be open.

Gustav pounded Jamaica with rain, flooding streets with water and mud, as Louisiana prepared for the system to strengthen into a hurricane.

Gustav had sustained winds of 65 miles (105 kilometers) per hour as of 8 a.m. Miami time today and was centered near the western tip of Jamaica, 100 miles west-northwest of the capital, Kingston, the Miami-based U.S. National Hurricane Center said on its Web site. It is heading west-northwest at 8 mph.

Remember Katrina

Hurricane Katrina formed over the Bahamas on Aug. 23, 2005, making landfall in southeast Louisiana on Aug. 29. Hurricane Rita, the most intense tropical cyclone ever observed in the Gulf, made landfall Sept. 24, 2005, at Sabine Pass near the border of Texas and Louisiana.

The storms curtailed Gulf gas flow, prompting the fuel to touch $15.78 per million Btu on Dec. 13, 2005, the highest since gas began Nymex trading. Katrina, which reached Category 5, the strongest grade hurricane, closed 95 percent of offshore output in the Gulf.

The hurricane season runs through November with the peak time for storms between now to the end of September.

Royal Dutch Shell Plc shut some offshore operations, removing about 800 workers to shore before Gustav arrives and Anadarko Petroleum Corp. will idle offshore Gulf operations by Aug. 31.

Houston-based Transocean Inc., the largest offshore oil driller, evacuated about 400 workers from rigs in the Gulf. Another 1,500 will be moved before the storm arrives.

To contact the reporters on this story: Reg Curren in Calgary at rcurren@bloomberg.net.