Nymex Issues Force Majeure on Gas Delivery Contracts on Gustav

By Dinakar Sethuraman

Sept. 1 (Bloomberg) -- The New York Mercantile Exchange declared force majeure on natural gas deliveries for August and September contracts after a pipeline operator shut down operations because of the approach of Hurricane Gustav.

The announcement follows the decision by Chevron Corp.'s Sabine Pipe Line LLC to begin shutting operations before Hurricane Gustav makes landfall, according to a Nymex statement dated Aug. 31. Sabine issued force majeure on Aug. 30, according to a statement on the pipeline operator's Web site.

Force majeure allows companies to cite unexpected or uncontrollable events to avoid penalties for failing to fulfill delivery contracts. A wholly owned subsidiary of Chevron, Sabine operates a 131-mile gas line running between Louisiana and Texas as well as Henry Hub, the benchmark pricing and delivery point for New York Mercantile Exchange gas futures.

Fifteen of 16 analysts surveyed by Bloomberg News, or 94 percent, said natural gas prices would rise through Sept. 5. None said prices would fall.

Gustav, which strengthened to a hurricane near Jamaica today, ``may directly impact Sabine's system and operations,'' Sabine Pipe Line said.

To contact the reporter on the story: Dinakar Sethuraman in Singapore at dinakar@bloomberg.net.