Natural Gas Falls on Signs of Little Offshore Damage From Ike

By Reg Curren

Sept. 15 (Bloomberg) -- Natural gas futures fell in New York on speculation damage to offshore rigs and platforms from Hurricane Ike was limited. Prices also dropped on speculation the bankruptcy filing by Lehman Brothers Holdings Inc. signals reduced trading in commodities.

Ike moved through the Gulf of Mexico last week, forcing companies to keep a majority of offshore production shut after closing platforms for Hurricane Gustav earlier this month. About 14 percent of U.S. natural gas output comes from the Gulf. Lehman toppled after it was unable to find a buyer to help overcome losses in subprime mortgages.

``There's a lot of liquidation of positions and a lot of the commodity stuff is going to be thinner because you're not going to have the players you usually have,'' said Michael Rose, trading director at Angus Jackson Inc., a futures brokerage in Fort Lauderdale, Florida.

Natural gas for October delivery fell 20.7 cents, or 2.8 percent, to $7.159 per million British thermal units at 10:26 a.m. on the New York Mercantile Exchange. Prices have dropped 4.3 percent this year.

Lehman and Merrill Lynch & Co., which is being bought by Bank of America Corp., have significant commodity trading operations, Rose said.

``This huge credit thing has swung across and hit everything in its path. It's like a huge hurricane and it's going to take a while for these markets to recover,'' Rose said.

Lehman Trading

Lehman had built up its energy trading operation ``quite sizably over the past couple of years,'' said John Kilduff, senior vice president of risk management at MF Global Inc. in New York.

``This isn't so much about Lehman's footprint in the commodity space, but on overall concerns about liquidity and what represents a safe haven,'' he said. ``People are going to cash. We had made the argument that energy had taken its place among treasuries, gold and the dollar as a safe haven, though it's pretty clear in these most desperate times that it doesn't make the cut.''

Royal Dutch Shell Plc, Europe's largest oil company, said it has found some ``moderate'' damage to offshore oil and gas installations following Ike and no major structural damage to any platforms or drilling rigs.

Total SA may resume operations today at two offshore oil platforms in the Gulf of Mexico after they escaped major damage, the company said. Devon Energy Inc. began to return workers to offshore platforms, though the company didn't say when production might resume.

Crude oil also fell on the lack of damage from the storm and the trading fallout from Lehman.

Crude oil for October delivery declined $5.27, or 5.2 percent, to $95.91 a barrel on the New York exchange.

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