By Mark Peters Of DOW JONES NEWSWIRES Natural gas futures climbed Monday after a sharp selloff last week as the risk to offshore production from hurricane season helped put a floor under prices. Natural gas for October delivery rose 9.8 cents, or 2.7%, to $3.803 a million British thermal units on the New York Mercantile Exchange. The rise comes after steep declines last week that pushed futures to 11-month lows. "It dropped a long way in a short time," said Kyle Cooper, director of research for Houston-based IAF Advisors, on Monday. Yet, he added, although prices could gain 15 cents to 20 cents in the coming days, any rebound likely will be short lived. Supplies remain robust as production from shale formations in the U.S. remains strong. At the same time, gas demand from the power sector will ebb as summer ends and gas-fired power plants are needed less to keep up with air conditioning demand. Warmer-than-normal temperatures this fall actually could become a new drag on prices as gas-fired furnaces for heating kick on less, Cooper said. Still, prices continue to see some support from the hurricane season, although no storms are currently headed for U.S. energy production region in the Gulf of Mexico. The gulf is home to about 11% of domestic gas output, and prices can rise sharply if storms affect production. "Eventually, a storm is likely to find its way into the (Gulf of Mexico) region and the funds will cover some shorts and a quick price spike of some 10-15% could transpire. However, we would continue to caution against attempts to pick a bottom to this sharp price decline," Jim Ritterbusch, president of energy advisory firm Ritterbusch and Associates, wrote in a note to clients Monday. The National Hurricane Center is tracking two named storms, Danielle and Earl. Both are projected to miss the Gulf of Mexico. The center is also tracking showers and thunderstorms about 1,050 miles east of the Lesser Antilles that have a 90% chance of forming into a tropical cyclone in the next two days. The system has been slow to organize because of cool waters churned up by Danielle and Earl, and most models have the potential storm taking a similar path up the U.S. east coast, said David Streit, a meteorologist with the private forecasting firm Commodity Weather Group. -By Mark Peters, Dow Jones Newswires; 212-416-2457; mark.peters@dowjones.com

Source