NYMEX experienced another unexpectedly sharp drop over the week, the second week of declines following record highs at the beginning of the month.

What’s going on? Market fundamentals such as storm patterns and nationwide temperatures didn’t change in a way that would presage such a strong price reaction, though there was no shortage of industry analysists straining themselves to claim that this was so.

A more likely explanation is the speculative market is simply feeding off itself. It’s clear a lot of people are looking for quick gains in natural gas, and last week’s drop is making investors nervy. There’s a bit of cut-and-running going on.

What’s next? Watch this space. This could be a blip on the continuing climb, or it could be the first sign of a sea change.

The past two weeks clearly show two things about the current natural gas market, however: first, that price volatility is at a very high level, with jumps that once would have caused headlines becoming commonplace; and second, that an understanding of speculation and “human factors” should now be considered a market fundamental in tracking the NYMEX.

What does this mean to you? Yesterday’s knowledge may not be enough in today’s market. Events which seem far removed from your market understanding may be taking the market to places you don’t expect and can’t predict. And today’s market is mighty fast. Are you positioned to act when the opportunity arrives?

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