The 26% Crash: Nature Just Broke Natural Gas
Inside the historic drop, the gold margin call, and oil’s sudden calm.
To provide further background about Gold analysis, refer to my previous article below:
Executive Summary
Natural Gas Crashes: Prices fell 26% on Monday. This was the biggest one-day drop since 1995. Weather forecasts suddenly turned warm and killed the winter trade.
Metals Melt Down: Gold and silver fell hard from record highs. The exchange raised margin requirements. This forced traders to sell to raise cash.
Oil Cools Off: Crude prices jumped early in the week on war fears. They fell back by Friday as the U.S. and Iran agreed to talk.
This Week’s Key Moves
WTI Crude: $63.55 (-2.4%). Driver: Tensions eased after the U.S. and Iran confirmed talks in Oman.
Brent Crude: $68.05 (-2.0%). Driver: Supply is tight in the North Sea, but the war fear is fading for now.
Natural Gas: $3.24 (-25.7%). Driver: Weather models flipped from cold to warm overnight.
Gold: $4,894 (-12.5% from peak). Driver: Higher costs to hold positions and a stronger dollar.
Silver: $78.86 (-35% from peak). Driver: Forced selling after margin hikes.
Copper: $5.86 (Flat). Driver: Stabilised after an early week drop
Deep Dive: The Week Weather Broke the Gas Market
Monday, February 2, started with a shock. Natural gas traders came back from the weekend and found the floor missing.
Henry Hub futures crashed 25.7% in a single session. They settled at $3.24. This erased a full week of gains in just six hours.
It was not a computer error. It was the weather.
On Friday, models predicted a deep freeze. By Monday morning, those models flipped. They showed a warm mid-February. The heating demand that traders bet on simply vanished.
If you bought at Friday’s close around $4.36, you lost a quarter of your value by Monday lunch.
The Inventory Trap
This crash hurt because the setup looked so bullish just days before.
Winter Storm Eira had just pulled a massive amount of gas out of storage. The EIA reported a record draw of 360 billion cubic feet. Supplies were getting tight.
Then the forecast changed.
Now the market sees too much supply again. Propane stocks are 37% above the five-year average. Gas storage is comfortable for a warm February. The window for $5.00 gas is likely closed for the season.
Metals Meltdown: The Margin Call
While gas fell because of weather, gold and silver fell because of the rules.
Gold and silver hit all-time highs on January 29. Gold hit $5,595 and silver hit $121. Then the bottom fell out.
By Friday, February 6, silver had lost 35% of its value. Gold was down 12.5%.
Why did this happen?
Two things happened at once.
First, President Trump nominated Kevin Warsh for Fed Chair. Warsh prefers tight money and a strong dollar. A strong dollar usually pushes metal prices down.
Second, the exchange changed the rules. The CME Group raised “margin requirements.” This is the cash traders must put up to hold a position.
Gold margin went from 6% to 9%.
Silver margin went from 11% to 18%.
This forced leveraged traders to sell immediately to cover the new costs. It created a loop. Selling lowered prices, which forced more selling.
The fundamental story has not changed. Central banks are still buying gold. But the “Warsh Shock” cleared out the gamblers
Geopolitics: The War Premium Fades
Oil had a wild week too.
On Wednesday, Brent crude rallied to almost $70. There were reports of Iranian gunboats near a U.S. tanker. The U.S. Navy also shot down a drone.
Traders worried about the Strait of Hormuz. This is the narrow channel where 20% of the world’s oil passes. If that closes, prices skyrocket.
The Oman Factor
On Thursday, the temperature dropped. Reports confirmed that U.S. and Iranian officials would meet in Oman for talks.
This news acted like a pressure valve. The immediate fear of war went away. By Friday, Brent crude drifted back down to $68.05.
The physical market is still tight. U.S. crude inventories fell by 3.5 million barrels this week. Refineries are busy. But for now, the geopolitical fear is gone.
Week Ahead: What to Watch
Oman Talks Results: If the U.S. and Iran talks fail, oil prices will jump back up. If they go well, prices could drift lower.
BP Earnings (Feb 10): BP is the last big European oil company to report earnings. Look for news on share buybacks. Other companies have cut them.
EIA Report (Feb 11): Watch the crude inventory number. If stocks fall again, the $65 floor for oil looks very strong.
Action Items
For Traders: Natural gas is too dangerous right now. The weather models are jumping around. Stay away from directional bets. Look at volatility trades instead, trade the technicals, a gold setup can be found on my previous article playing the intermediate levels.
For Operators: Buy copper now. The price stabilised at $5.86. If you need materials for the spring, this is likely your best price.
For Investors: ConocoPhillips cut $1 billion in costs this week. The big oil companies are playing defence. Move some money into midstream companies (pipelines and storage) if you’ve already have Exxon/Chevron in your portfolio, otherwise wait for a pull back in their current bullish trend. They make money on volume, not just high prices. Also, check the Gold entry at “Bull Retest Zone” above, Central banks still buying, Fed still easing. This was a correction, not a reversal.
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Wassim C.
This content is for educational purposes only and does not constitute financial, legal, or tax advice. All opinions and analyses are my own, and any actions you take are at your own risk after consulting an appropriate professional.
Great breakdown, Wassim — the confluence of the 61.8% Fib retracement, 50-day MA, and trendline support all converging in that $4,500–$4,600 zone makes it a compelling area to watch for a potential re-entry. With NFP on Friday and the Warsh nomination still in play, patience before committing seems like the right call here.