Natural gas markets exploded today, with the NYMEX front month posting midday gains of 8% and threatening the $5.50 USD/MMBtu price threshold. Profit taking in the afternoon returned some earlier gains, but the contract still settled at $5.29 USD/MMBtu, posting a $0.23 USD/MMBtu or 5% increase on the session. The move was disproportionately in the front two months, with the calendar strip (Jan-26 to Dec-26) only climbing an average of $0.11 USD/MMBtu. With today’s move, the Jan-26 (current front month) contract has risen $1.34 USD/MMBtu or 34% in the last two months.

Today’s move was induced by a mix of cold weather demand and technical trading momentum. Weather demand materialized cold over the last two days, and forecasts continue to point towards a well below normal Eastern North America through December. The market has shifted away from fundamentals, like storage or production, and instead remains hyperfixated on weather forecasts. Traders can expect more severe swings like today throughout the winter as extreme weather conditions greatly increase volatility. With the cold festering in the forecasts and a massive impending storage withdrawal next week, risk is firmly to the upside. (PB)

Source: NOAA 6 to 10 Day Weather Outlook