February 2022 NYMEX natural gas FUTURES expired at $6.265 on Thursday after making the most historic price gain ever seen for a natural gas futures contract on its expiration day. The contract settled higher by $1.988 or 46.5% on the day. The contract had touched an intraday high of $7.346 before falling right before the market closed. The fact that all the buying occurred in the final 2 hours of trading is evidence of a classic "short squeeze" forcing speculative traders, who had sold Feb futures, to cover their bearish bets in a rapid fashion.

Market liquidity on Thursday for the Feb22 contract was very low as volume on the contract was only 7,182 trading lots. This compares to volume on the now prompt Mar22 month which saw 193,252 trading lots exchange hands on that day. The CFTC (The Commodity Futures Trading Commission) is sure to investigate this event to determine if there was any market manipulation facilitated by "bad actors", but this very well could be just a reality check for many end-users, that natural gas is again, going to be a very volatile commodity with regards to trading in 2022.

The rally In February's expiration price and the "bomb cyclone" of weather hammering the mid-Atlantic and New England regions this weekend provided ample opportunity for both the Mar22 contract and the balance of 2022 strip to rally significantly for the week. Significant price gains were even seen for the calendar year 2023 strip. While a price retracement is likely, end-users should expect a very bumpy ride in the market over the next few weeks.

For the week ending 1/21, the EIA reported a withdrawal of 219 BCF. Storage inventories are now 10.6% below year-ago levels and 1% below the previous 5-year average. A larger storage withdrawal is expected for the week ending 1/28 and the market could see a string of above normal withdrawals in the coming weeks based on weather outlooks.