Looming front-month expiration helped spark a massive surge in natural gas futures prices in early trading Monday. The expiring October Nymex contract was up 32.4 cents to $5.464/MMBtu at around 8:50 a.m. ET; November was up 32.8 cents to $5.528.

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Higher prices at European benchmarks and the impending expiration of the October contract appeared to be the two likely catalysts for the early surge in prices Monday, Bespoke Weather Services told clients in a note.

Contract expiration “is likely the main item to note, as options expire today, and the October contract rolls off the board tomorrow,” Bespoke said. “Regardless of any actual data, we have tended to see abundant buying into contract expirations. As such, it is difficult to tell how high we could run here, but we do see risks of a sizable pullback once the smoke of expiration has cleared.”

The end-of-season storage trajectory has been “shifting higher” to potentially over 3.6 Tcf, and forecasts continue to show “awful” weather-driven demand levels for natural gas, according to the firm.

“This will begin to increasingly matter over the next few weeks, to be sure,” Bespoke said.

EBW Analytics Group analysts advised clients Monday to expect options expiration and final settlement of the October contract to potentially lead to “steep price moves untied to fundamental shifts.”

Forecasts over the weekend trended cooler, according to the firm, which modeled higher heating demand for the first week of October as a result.

“Natural gas production gains also appear to be leveling off to help shore up a weak near-term fundamental outlook,” the EBW analysts said. 

Even so, projected below-normal heating demand would put the gas market on course to come in 2.9 Bcf/d looser than the five-year average over the next three storage weeks, stretching into mid-October, according to the firm’s estimates.

“Options expiration and final settlement will drive price action today and tomorrow, but if October weather does not turn more supportive, downward pressure on Nymex gas is likely later this week,” the EBW analysts said.

From a technical standpoint, bulls exited last week with “more work to do” even after posting two straight sessions of double-digit gains, according to ICAP Technical Analysis analyst Brian LaRose.

“Bulls need to quickly chip away at the ratio retracements associated with the recent highs to have a chance at making a run towards $6.108,” LaRose told clients, referring to the soon-to-be-prompt November contract. “Fail to get through these retracements (and the $5.655/5.695 highs) and bears could get another crack at $4.690-4.655 support.”

November crude oil futures were up $1.48 to $75.46/bbl at around 8:50 a.m. ET.