Crude Oil Hits $70, Natural Gas Soars 23%.
Hurricane Katrina ripped through the Gulf
Coast over the weekend as a category 5 storm, with winds up to 175mph, forcing
oil and gas producers in the region to close facilities and evacuate personnel.
The region accounts for 24% of all US gas output.
Among the companies forced to shutdown facilities were Exxon
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PowerRating). The Exxon
closure alone accounts for the loss of 300 million cubic feet of gas per day.
Not surprisingly Natural Gas +13.71% was the most
volatile futures contract today, trading as much as 23% higher before eventually
closing at $11.15. Natural Gas was highlighted in the
TradingMarkets.com Momentum 5 list on Friday night.
The New York Mercantile Exchange (NYMEX) declared force
majeure on August Natural Gas futures as Chevron shutdown its Sabine Pipe
Line that feeds the Henry Hub in Louisiana. The declaration allows producers to
avoid penalties for failure to deliver supplies. Read the full NYMEX press
release here.
The potential crisis was averted when the company announced that the pipeline
avoided major damage and will return to full service. The Henry Hub facility
connects with 9 interstate and 4 intrastate pipelines and is the pricing point
for all Natural Gas futures traded on NYMEX.
Crude Oil +1.62% also experienced a volatile session,
opening significantly higher than Friday’s close before hitting the high of the
day in early trading. Crude Oil then sold off for most of the day before a pop
higher in the last 30 minutes of trading to close at $67.20. Heating Oil
+3.41% also closed higher.
Surging oil prices led to a rally in US treasuries as fears
the prolonged high prices will dampen economic growth. The 10yr T-Note
+0.14% pulled back from its intraday high as the storm was downgraded from
category 5 to category 2 by the time it hit Mississippi. Gold -0.70% was
also boosted for the same reason early in the day but closed slightly lower.
The grains were largely unaffected, none of the contracts
closed up or down 1%. However, Lumber +3.60% closed higher on the expectation
demand will increase in the months of rebuilding following the storm.
Economic News
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Ashton Dorkins