Gas fell 1.8 percent. The National Hurricane Center said Isaac, in the southeastern Gulf, will become a Category 1 hurricane before reaching Louisiana Aug. 29. About 48 percent of offshore output was shut today, the government said. The Gulf accounted for 7 percent of U.S. gas production in 2011, down from 17 percent in 2005.
“The dependence on the Gulf is so much less,” said Dominick Chirichella, senior partner at the Energy Management Institute in New York. “With the intensity that this thing is projected to have, it doesn’t look like it will result in a lot of infrastructure damage.”
Gas for September delivery fell 4.9 cents to $2.653 per million British thermal on the New York Mercantile Exchange, the lowest settlement price since June 22. Gas has declined 11 percent this year.
October $3 calls, bets that prices will rise, were the most actively traded gas options. They fell 2.9 cents to 6.2 cents on volume of 1,401 contracts.
Isaac was about 280 miles (450 kilometers) southeast of the mouth of the Mississippi River with top winds of 65 miles per hour, the Miami-based hurricane center said in a 2 p.m. advisory. The storm may go ashore south of New Orleans with winds peaking at Category 1 strength of 85-90 mph on the five- step Saffir-Simpson scale, the center said. Hurricane Katrina in 2005 went ashore as a Category 3 storm, according to Weather Underground, a website based in Ann Arbor, Michigan.
BP Plc and Anadarko Petroleum are among companies that have evacuated offshore personnel from a total of 346 oil and gas platforms and 41 rigs, the Bureau of Safety and Environmental Enforcement said. About 2.17 billion cubic feet of gas were offline.
“Cooling rains and possible power outages are demand-side offsets to what might be” 3 billion cubic feet a day of offshore production losses, Tim Evans, an energy analyst at Citi Futures Perspective in New York, said in a note to clients today.
Temperatures in most of the lower 48 states will be above normal through Sept. 5 with the Gulf and West coasts will see normal readings, according to MDA EarthSat Weather in Gaithersburg, Maryland. The high in New York on Sept. 4 may be 87 degrees Fahrenheit (31 Celsius), 8 above normal, and Chicago may be 5 above normal at 84 degrees, AccuWeather Inc. in State College, Pennsylvania, said.
Cooling demand nationwide will be 20 percent above normal over the next seven days, according to Weather Derivatives in Belton, Missouri.
Gas inventories totaled 3.308 trillion cubic feet in the week ended Aug. 17, 12 percent above the five-year average for the week. Hotter-than-normal weather boosted demand from power plants, helping to narrow the supply surplus from a six-year high of 61 percent at the end of March.
The Energy Department said inventories may end October at an all-time high of 3.954 trillion cubic feet. Increased production from shale formations such as the Marcellus in the Northeast is making up for lower output from less-profitable deposits such as the Haynesville shale in Louisiana and the long-term decline in Gulf production, the department said in its Short-Term Energy Outlook on Aug. 7.