Though it certainly seemed unlikely yesterday, the May natural gas contract ended up logging a small gain on the week, rallying 3% today to recover all of its losses yesterday.
The result was a very slight weekly increase at the front of the natural gas strip, with larger losses further along.
The May/June K/M contract spread rallied to new short-term highs off this as well (despite the settle being at lower levels than we saw earlier in the week) while the V/F spread also narrowed significantly.
This comes as natural gas trading has gotten marginally more interesting, as the daily prompt month trading range has ticked up each of the last two days and is back within historical norms.
Meanwhile, with stockpiles significantly below average and short-term weather supportive, we have seen the K/M spread move to levels not seen since post-Polar Vortex in 2014.
Certainly, the rally today was not weather-driven, with our morning GWDD forecast actually being lower than yesterday afternoon’s.
Still, this time of year these short-term GWDD changes tend to be smaller and be less of a catalyst for price than we would tend to see over the winter or summer months. Instead, we see increased signaling from spreads as well as weekly EIA data and balance readings, which we regularly analyze for clients. In our recently published Pre-Close Update we explained how we expect model guidance to trend over the weekend, looking at how spread action today seemed to skew price risk next week and just how tight balance was in yesterday’s EIA print.