Taking a break from the passive expirations of recent months, the January natural gas futures contract went on a roller-coaster ride in the last hour of trading Thursday, soaring from $6.885 to a high of $7.240 before going off of the board at $7.172, up 12.6 cents from Wednesday’s close.

In morning trade the contract was pushed below its previous $6.935 low to record a $6.860 tick. However, shorts in the market were left out in the cold once the afternoon rolled around. After trading at $6.885 just after 1:30 p.m. EST, the January contract took off, putting in the $7.240 high at 2 p.m.

“I think what we saw Thursday was that some shorts found out that they stayed too long at the fair. It was a pretty volatile close,” said Ed Kennedy of Commercial Brokerage Corp. in Miami. “With expirations running pretty orderly as of late, it has been a little while since we have had one of these surprises.”

The broker added that cash market prices, paired with changing weather forecasts, made $6.860 futures appear a little too cheap. “We’ve seen some long liquidation over the last couple of days, but we found ourselves down in the $6.80s, which is below where cash has been trading recently. I think the last group of longs decided to take delivery, meaning that the selling that the shorts were expecting did not come into the market. It really looks like somebody in the market panicked right there at the end.”

Taking a look at the current price area, Kennedy said recent changes in the weather outlook could lead to higher prices. “One of the reasons that the longs in the market may have decided to take some of these prices is because there appears to be some significant changes in the weather forecasts for the next two weeks,” he said. “All of the northern tier states now look like they are going to be colder than normal along with California. While the Mid-Atlantic and Southeast regions are expected to be warmer than normal, it’s the people up in the rust belt that call a lot of the shots. While this does lend some support to the bullish case, traders beware. What we are seeing now is such a departure from week-ago forecasts, I’m curious to see if we will see yet another change in the next few days.”

With the February contract now assuming front-month status, the broker said weather will continue to call the shots on price direction. The February contract’s movement on Thursday was muted in comparison to that of the January contract. While February natural gas traded widely between $6.950 and $7.300, the contract ended up closing at $7.200, up only 3.6 cents on the day.

Traders, at least those left during this heart of the holiday season, will now turn their attention to the Energy Information Administration’s natural gas storage report for the week ended Dec. 21. The report’s release was moved from Thursday to 10:30 a.m. EST Friday due to the Christmas holiday on Tuesday.

The industry consensus is that the report will reveal the third consecutive triple-digit withdrawal and will outpace historical comparisons. Last year for the week, only 49 Bcf was pulled from underground stores. The five-year average withdrawal for the week is 119 Bcf.

According to a Reuters survey of 18 industry players, the average withdrawal expectation is 145 Bcf. The estimates of respondents spanned from 125 to 163 Bcf.

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