Natural-gas prices extend their rally, but analysts warn of volatility tied to this week’s contract expiration
Natural-gas prices looked to tally their fifth straight gain on Monday after touching their highest level in about three years, but analysts warned of further volatility tied not only to the winter weather forecasts, but to the expiration of the February contract this week.
The natural-gas market is primed for more volatility in the near term, “with multiple dollar price swings” possible as icy and snowy weather continues to pound the eastern part of the U.S. and as below-average temperatures are expected to linger this week, said Tyler Richey, co-editor at Sevens Report Research. “But the prospects of warmer weather in early February could easily serve as a catalyst for a significant price drop in natural gas, with its futures market traditionally one of the most volatile in the entire commodity complex,” he said.
Keep in mind, as well, that the front-month February futures contract expires at the end of Wednesday’s trading session, and liquidity there is extremely thin, said Rebecca Babin, a senior energy trader and managing director at CIBC Private Wealth.
