Tropical Storm Lee continues to creep northward near the Louisiana Coast and is expected to be a flood threat across the Southeast into early next week.

Almost half of the oil production and one-third of natural-gas output in the U.S. Gulf of Mexico was shut down Friday due to Lee, the Bureau of Ocean Energy Management, Regulation and Enforcement said.

Despite the shut-downs, natural gas futures fell Friday, as traders focused on the prospect for cooler temperatures and reduced demand ahead.

Natural gas for October delivery recently traded down 4.8 cents, or 1.2%, to $4.003 per million British thermal units on the New York Mercantile Exchange.

With the U.S. still well supplied, market participants shrugged off a storm forming in the central Gulf of Mexico that the government said has shut in about 2.4 percent of Gulf natural gas production as of late Thursday. The Gulf accounts for about 7.4 percent of total U.S. gas output.

“The market’s starting to realize somewhat that the storm in the Gulf isn’t really going to impact gas that much,” said Eric Bickel, commodity analyst at Summit Energy in Louisville, Ky. “We’re still at record-level production.”

Working gas in storage was 2,961 Bcf as of Friday, August 26, 2011, according to EIA estimates. This represents a net increase of 55 Bcf from the previous week. Stocks were 137 Bcf less than last year at this time and 60 Bcf below the 5-year average of 3,021 Bcf. In the East Region, stocks were 107 Bcf below the 5-year average following net injections of 54 Bcf. Stocks in the Producing Region were 44 Bcf above the 5-year average of 913 Bcf after a net withdrawal of 3 Bcf.  Stocks in the West Region were 3 Bcf above the 5-year average after a net addition of 4 Bcf. At 2,961 Bcf, total working gas is within the 5-year historical range.

Meanwhile, natural gas for next-day delivery at the benchmark Henry Hub in Louisiana recently traded at $4.0685/MMBtu, according to Intercontinental Exchange, down 11.2 cents from Thursday’s average. Natural gas for next-day delivery at Transcontinental Zone 6 in New York traded at $4.23/MMBtu, down 17.3 cents from Thursday.

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