U.S. natural gas futures soared over 60% in the last half hour of trading on Jan. 27, in a late flurry of buying that coincided with the imminent expiration of the February contract at the end of the session.

The contract ultimately ended up about 47% in their biggest daily percentage gain on record—but on total volume of just about 7,000 contracts, far below the next-month contract that rose a more typical 6.1% on 156,000 contracts traded. On average, about 336,000 futures contracts traded on a daily basis on the Nymex this week.

Traders cited short-covering after a larger-than-usual weekly storage draw and forecasts for colder-than-normal weather to continue through mid-February.

“Most folks are not playing in that contract ... because of the craziness that goes on when these contracts go to expiration,” said John Kilduff, partner at Again Capital LLC in New York. “There is no doubt that people have gotten caught short.”

On their last day as the front month, gas futures for February delivery rose $1.988, or 46.5%, to settle at $6.265 per MMBtu, the highest close since October 2021.

Futures contracts expire on a monthly basis, and the holders of that contract are required to take delivery of the underlying commodity, be it natural gas, oil or something else. Often, volumes decline in the expiring contract, as people close out positions in advance to avoid unexpected volatility.

“That is why the clearinghouses usually chase those of us who don’t do physical trade out of the market long before the expiration,” Kilduff said.

The flurry of action suggested an attempt by traders to take advantage of thin volumes rather than a changed assessment of market fundamentals.

“Short sellers may have gotten squeezed out ahead of February expiration,” said Edward Moya, senior market analyst at OANDA. “Many hedge funds were betting natural gas would go up as frigid weather sent demand soaring, but money managers were short.”

Officials at the Nymex were not immediately available for comment.

Traders said the price increase came after the latest midday weather forecast called for even colder weather over the next two weeks than was previously expected.

“Near-term weather models were revised significantly colder,” said John Abeln, senior analyst, natural gas research at Refinitiv. “The prospect of a much colder February and very low volume in the last day of the February contract trading were perfect ingredients for explosive volatility.”

In the spot market, frigid weather and high heating demand over the past week or so in the U.S. Northeast have kept next-day power and gas prices in New York and New England at or near their highest levels since January 2018.

“The market finally woke up to the fact that last week was the largest natural gas draw of the year and weather this week points to another large draw in the report next Thursday,” said one energy trader who asked to remain anonymous.

The U.S. Energy Information Administration (EIA) said utilities pulled 219 Bcf of gas from storage during the cold week ended Jan. 21, the biggest weekly withdrawal since last year’s February freeze cut gas supplies by freezing wells and pipes in Texas and other central states.

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