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A woman covers her face to protect herself from the frigid cold temperatures though downtown Chicago.JIM YOUNG/Reuters

Natural gas prices, long depressed by industry oversupply, are on an upward tear as strong demand brought on by cold weather pushes storage levels to 10-year lows.

The market was especially volatile Wednesday, with some traders paying as much as $38 a gigajoule at the AECO storage hub, the benchmark for gas pricing in southeastern Alberta. Huge spikes such as this are short-lived, but demonstrate how rocky the market has become.

The volatile natural gas market is powered by a handful of factors. The sustained cold weather in Eastern Canada and the United States has customers using more natural gas, putting pressure on inventory. It also means natural gas production is not all going smoothly, further dragging down supply. And while those two factors are enough to push prices higher, some traders are also stuck buying natural gas on the spot market in order to cover their short bets and cover commitments.

"Natural gas prices have been on fire," Chris Feltin, an analyst at Macquarie, said in a note.

Wednesday's jump to $38 a gigajoule was likely a blip caused by factors such as traders fulfilling inventory obligations for utility companies. The average AECO price averaged $25 a gigajoule near the end of the day, according to the Natural Gas Exchange Inc., a wholly owned subsidiary of TMX Group Ltd. The last time same-day AECO traded over $11 a gigajoule was in June, 2008, NGX said.

By way of comparison, the AECO spot price Tuesday spiked to $5.78 a gigajoule, Mr. Feltin said. Further, natural gas averaged $3.02 a gigajoule in 2013, according to his calculations.

Four of the past 11 weekly natural gas inventory reports out of the U.S. Energy Information Administration have seen the largest weekly draws in the past decade, Mr. Feltin noted. Canadian natural gas inventories are mimicking what is happening in the U.S., with national inventories at five-year lows, and inventories in the East touching 15-year lows, the analyst said.

Production is also a problem, Mr. Feltin said. Energy companies churned out 9.7 billion cubic feet in Western Canada Tuesday. Before the cold snap hit, they produced 10.2 billion, he said.

"There's been a negative production response because of the cold weather," he said.

The unpredictable market will likely persist as long as the frigid weather sticks around North America. "We are expecting short-term prices to remain volatile with prices reacting to unseasonably cold weather," said Jim Oosterbaan, president of NGX.The rally, however, comes with an expiry date. Pricing for 2015 on the futures market has only moved a nickel, said Andrew Botterhill, a senior manager covering resource evaluation and advisory at Deloitte.

"What is positive for the industry is we've seen a more positive outlook for 2014, but on the flip side, we haven't seen in the futures market any movement for 2015," he said. "It is really showing to us this is short-term upticks in pricing that people are trading on and weather-related."

Higher natural gas prices are a boost for producers Encana Corp., Bonavista Energy Corp., Peyto Exploration & Development Corp., and ARC Resources Ltd. Smaller companies such as Corridor Resources Inc., Paramount Resources Ltd., Santonia Energy Inc., and Cequence Energy Ltd., also stand to gain, Mr. Feltin said.

Companies with operations solely in the oil sands may take a hit. They need natural gas to power their operations – with plenty of that directed toward creating steam for oil sands projects that use wells rather than mining techniques. MEG Energy Corp. and Canadian Oil Sands Ltd. fall into this category, the analyst said.