With U.S. natural gas production at record highs and ample amounts of fuel in storage, the futures market was sending signals that some traders have already given up hope of extreme price spikes this winter.

Based on current futures, the gas market likely already saw its highest closing price this winter (November-March) in early November when the front-month NGc1 settled at $3.52 per million British thermal units (mmBtu) on Nov. 3.

It is not unusual for the highest price of the winter to occur in November. Four of the highest prices seen during the past five winters occurred during November.

Traders noted that was because the anticipation of extreme cold is usually worse than the actual weather itself.

The highest winter prices were $7.31 per mmBtu on Nov. 23, 2022, during the winter of 2022-2023; $6.27 on Jan. 27, 2022, during the winter of 2021-2022; $3.24 on Nov. 2, 2020, during the winter of 2020-2021; $2.86 on Nov. 5, 2019 during the winter of 2019-2020; and $4.84 on Nov. 14, 2018, during the winter of 2018-2019.

The biggest sign that the market has given up on higher prices during this winter was the collapse of the premium of March 2024 futures over April 2024 NGH24-J24 to just 8 cents per mmBtu, the fourth record low in a row.

The industry calls the March-April spread the “widow maker” because rapid price moves resulting from changing weather forecasts have forced some speculators out of business, including the Amaranth hedge fund, which lost more than $6 billion in 2006.

The industry uses the March-April spread to bet on winter weather forecasts since March is the last month of winter heating season when utilities pull gas out of storage. A smaller March premium generally means the industry expects an easy or mild winter.
Source: Reuters (Reporting by Scott DiSavino, Editing by Nick Zieminski)