U.S. natural gas future prices skyrocketed 72% on Thursday on forecasts of colder weather. It was the sharpest one-day climb for the commodity since the contract launched in 1990, CME Group data confirmed.
The 72% surge in prices came before the expiry of the February contract for nat gas as weather forecasts now look colder. The March contract’s price rise paled compared to the February contract rise. But the 10% rise for the March contract—on any other day—would have been more noticeable.
Natural gas futures were trading below $4.50 per million British thermal units for most of the trading day, but some time after 12:45 p.m. EST, prices scrambled for the $7 mark, with the contract eventually settling at $6.265.
The huge spike in the February contract is a clear sign that bearish bets were being squeezed out of the market.
Natural gas prices have been particularly volatile as of late, with nat gas prices surging 6% just a day earlier as cold weather in many parts of the United States boosted demand and the Russia-Ukraine conflict spooked the market into fearing disruptions to the flow of natural gas from Russia to Europe.
The cold weather is expected to boost demand for natural gas through space heating and electricity in the coming days, with estimates from NatGasWeather.com estimating that natural gas demand will be strong through the weekend as a cold snap is expected to hit many parts of the country.
But today’s price movement is certainly more about a short squeeze than about demand forecasts. According to data compiled by Bloomberg, hedge funds have been net-long on nat gas contracts, expecting prices to rise. But money managers have still held onto a fair share of short positions.
Given the price spike, it is clear that some of those money managers waited until the eleventh hour to cover their short bets.
By Julianne Geiger for Oilprice.com
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"Sentiment" absolutely strong buy in US equities and strong sell in commodities particularly oil and natural gas.
Long US Treasuries