The February natural gas futures contract went off of the board with a bang Wednesday as expiration, continued cold and expectations of a 230 Bcf storage withdrawal report pushed values significantly higher. Fueled by a frenetic short-covering rally, February futures shot to $5.725 before easing to expire at $5.557, a new four-year high (Jan 2010) and up a whopping 52.4 cents for the session. March gas also added 52.4 cents to $5.465 and March crude oil slid 5 cents to $97.36/bbl.

Spot trading in physical natural gas Thursday for Friday delivery continued its recent Jekyll-and-Hyde personality with the East and Northeast points posting double-dollar-digit declines, while market centers in the Gulf, Midcontinent, California and the Rockies were solidly on the plus side of the ledger.

Adding to the day’s fireworks was an apparent snafu on the IntercontinentalExchange physical gas trading platform, which left traders mulling prices posted at 12:45 EST. According to sources, the IntercontinentalExchange (ICE) issued a trading hold on Wednesday at 12:45 EST, leaving another hour and 45 minutes of trading for the expiring Nymex February natural gas futures contract. ICE reported an average price for the Henry Hub of $5.1992, with a high of $5.26 and low of $5.15. Trading volume was 263,300 MMBtu.

Sources said the ICE market kept going into five-second lockouts and was unable to accept offers, leading to speculation that ICE realized the problem and issued the market hold, thus limiting trading. ICE day-ahead trading typically ends at 1:00 EST, but Nymex February futures kept trading. Time and sales data showed February natural gas futures trading at $5.241 at 12:45 EST, and futures traded at about that range until 1:30 EST and then “never looked back,” said a broker.

A spokesperson at ICE was able to confirm only that there were “issues” with natural gas trading.

“We heard rumors that ICE was down, and the only place you could go was Globex,” said a New York floor trader. “The way the market looked it appeared to be a short covering rally. It was only the first two months and the February contract carried the March higher.

“This market move has blown through everything and points higher, but [Thursday] I would expect a little bit of a correction because it has gone up so far so fast, but it has blown through all the technical indicators.” Wednesday’s “action was much more due to contract expiration rather than Thursday’s storage report. I have heard a 236 Bcf number, but it we get a 230 Bcf withdrawal, we’ll probably get a sell off, just because it went up so fast,” he said. “Nothing goes up forever.”

Thursday’s storage report from the U.S. Energy Information Administration for the week ending Jan. 24 may infuse another round of volatility. Expectations were for a withdrawal well in excess of last year’s 191 Bcf pull and a five-year average withdrawal of 162 Bcf. IAF Advisors of Houston calculated a pull of 236 Bcf, and a Reuters poll also showed a 236 Bcf withdrawal. Tim Evans of Citi Futures Perspective is looking for a decline of 230 Bcf.

In eastern markets, Algonquin Citygates fell $13.06 to $14.88, and Iroquois Waddington next-day gas slumped $12.27 to $10.86. Gas on Tennessee Zone 6 200 L dropped $19.32 to $14.77.

Gas on Transco-Leidy fell 65 cents to $3.82, and Dominion Thursday deliveries came in at $4.75, down 45 cents. Tetco M-3 next-day packages were seen $13.58 lower at $9.90, while gas headed for New York City on Transco Zone 6 slumped $13.60 to $14.26.

Weather forecasts have been modestly cooler. WSI Corp. in its six- to 10-day outlook on Wednesday indicated wide below-to-much-below normal temperatures from the Pacific Northwest to Minnesota, to Texas and New England. Only the Southeast is forecast to have normal to above normal temperatures. The “forecast is a bit cooler in the Plains and East, especially in Texas. Forecast confidence remains about average, although questions remain on the tracks of two storm systems next week.

“The tendency in the overnight models was to suppress the SE ridge a bit, making for weaker/more shallow storms and colder temps for the East Coast than what was advertised in [Tuesday’s] 12z runs.”

Analysts see the higher prices paid in the cash market as boosting futures.

“The natural gas futures turned back to the upside on Tuesday, supported by a colder temperature outlook than a day ago, as well as trade in the day-ahead physical market at premium levels,” said Citi’s Evans. “The Henry Hub delivery point for the Nymex futures, for example, was changing hands at $5.23; Chicago Citygate went for an average of $6.57, and Transco Zone 6 (NY) was $30.20/MMBtu.

“While there’s clearly a difference between Jan. 29 and February average delivery, these higher cash values do exert an upward tug on nearby futures, particularly as they approach [Wednesday’s] February expiration.”

Those searching for a top in the market are waging a difficult battle, according to a leading technical analyst, who said there’s “a good case for a complete advance off the $3.129 low. However, we are still missing the two most important ingredients in the recipe for peaking action, a bearish bias on the short-term technicals and a break below key support,” said United ICAP’s Brian LaRose.