BWS Blog


Bull Spreads Start To Unwind

Wednesday, October 10, 2018 at 5:19PM


It was another volatile day in the natural gas space, as once again overnight gains in the November natural gas contract were mostly wiped out during the day, with the contract settling up just half a percent.

natural gas commodity weather

Again today we saw significant differences in contract movement along the natural gas curve too. The March contract actually logged the largest gain on the day.

natural gas commodity weather

The result was the beginning of an unwind in the recent huge rally we have seen in the X/H November/March spread.

natural gas commodity weather

In the last couple days we have seen a more sustained unwind in the November/January X/F spread as well.

natural gas commodity weather

This spread unwind came even as Henry Hub cash prices were relatively firm on the day.

natural gas commodity weather

Today's price action was not particularly surprising for clients, however, as we warned this morning that our natural gas sentiment had turned back to "neutral" despite the overnight rally for a number of reasons, including the inability to further add sizable GWDDs to the forecast.

natural gas commodity weather

natural gas commodity weather

In our intraday Note of the Day we took a look at the latest weather-adjusted balances and the role of Hurricane Michael in the natural gas market. We also looked at intraday spreads, concluding that January support should protect the $2.75 level for the November contract. Sure enough the contract set a low at $2.751 on the day.

natural gas commodity weather

Attention now turns to tomorrow's EIA report on last week's change in natural gas storage, where we are looking for another large storage build to be reported. In our Afternoon Update we looked at how the storage build would likely impact prices, as well as how the latest afternoon weather trends and balance dynamics skewed price risk as well. To take a look at this report and begin receiving all our detailed weather and natural gas-driven content try out a 10-day free trial here.