What a difference a day makes.
Gas futures are seeing a notable drop on Friday — but only after a huge Thursday for RBOB gas, when a loss of refinery capacity due to Harvey, simultaneous to the expiration of the September futures contract, spurred a rally that some described as panic-driven.
The fundamental drivers are straightforward. The temporary closures of Motiva's Port Arthur, Texas, refinery and of part of the massive Colonial Pipeline spurred high-octane language about the "'Worst' energy crisis US has seen in decades." Simply put, traders worried that much less gas would be produced, which threatened to send prices skyward.
The news came amid a highly precarious market backdrop, when the September contract was expiring. Energy futures trade with specific expirations, and once those specific futures contracts expire, those who are long the contract are entitled to receive a certain amount and type of the commodity at a preselected location (or "take delivery"), while those who are short must present that product (or "make delivery").
Traders who had shorted September gas, then, simply needed to get out. And the "scrambling" of forced sellers amid a storm-driven rise led to a "short squeeze," according to Phil Streible, senior market strategist at RJO Futures.
"It reached an emotional state," Streible told CNBC in a Friday phone interview.
"There was a lot of panic," agreed Stephen Schork, editor of the widely read Schork Report. "Anybody short got murdered."
On Friday, however, sense appears to be working its way back into the market.
"You make and take delivery in New York Harbor. That gasoline hasn't gone missing yet. So why are these prices spiking? It's purely a bet that you'll get fundamental development, but there's still gasoline there," Schork said.
"At the end of the day, no one is going without gasoline," he added. "All this 'sky is falling' stuff tends to happen. It's been 20 years since we've seen a hurricane down there, and people are a little rusty about how it's going to play out."
"Ultimately there will be a conclusion to this hurricane," Streible said. "There's still a massive overhang on oil supplies, and that will get cracked and turned into gas eventually."
After a busy Thursday that found him tied to his desk, Streible said on Friday that it "kind of seems like" the big move is over.
"Most of the traders cut out," he said. "After the jobs number, everyone bailed. People are getting a jump start on the holiday."