Wednesday, November 28, 2018 at 5:00PM
It was another wild day in the natural gas space, with the December contract shooting higher into its expiry as gas for the upcoming month was clearly in high demand. The December contract logged the largest gain on the day, clearly dragging the rest of the strip higher. The end result was the December/January Z/F spread ending in positive territory, which is far from common. Colder medium-range trends on afternoon weather model guidance likely helped add fuel to the fire in the expiration rally, as seen by colder 6-10 Day CPC forecasts. Our Morning Update also highlighted that "...we could see the December contract jolt higher as cash has been strong relative to futures recently..." which verified this morning and also likely played a role in this strong expiry, with the stage set by overnight HDD additions. Traders are now awaiting an EIA report tomorrow that should show a solidly smaller storage pull last week than was seen in the previous week thanks to less weather-driven demand, though it is unclear just how much smaller the draw will be. With implied volatility still so high and such a large move today, more significant moves can be expected tomorrow, especially around another important EIA print. In our Afternoon Update we broke down what the latest weather models were showing for overnight pricing risks as well as where forecasts likely trend into tomorrow, what we see for tomorrow's EIA print, and where we see gas price risks skewed into next week. Try out a 10-day free trial here to give the report a look.