U.S. natural gas futures suddenly spiked the most on record on Thursday afternoon, Jan. 27, a sharp move that could be a sign of bearish wagers being squeezed out of the market, according to Bloomberg. A spokesperson for CME Group confirmed a price jump of as much as 72 percent, the most since the contract launched in 1990. The surge came ahead of the February contract expiration.
The futures were trading below $4.50/mmBtu for most of the session until around 12:45 p.m. in New York, when an upward surge kicked in that pushed prices above $7.00/mmBtu. The February contract settled at $6.265/mmBtu.
Though hedge funds have been net-long on U.S. gas contracts, indicating they expect prices to rise, money managers still held substantial short positions, according to data compiled by Bloomberg. In a squeeze, traders exposed to wrong-way bets on lower prices are forced to close out those positions by purchasing higher-priced contracts.
Gas prices have been volatile in recent weeks as traders try to gauge whether winter cold will strain stockpiles of the power-plant and heating fuel. Although inventories are only 1 percent below normal for the time of year, exports have been near a record and production from shale basins has been relatively restrained.
The frenzy rippled through to later-month contracts: The much more widely traded March futures climbed as much as 9.5 percent.
On Friday morning, Jan. 28, prices were up as much as 14 percent, as fears of a Northeastern winter storm drove the market higher.