News wire — The United States is experiencing the coldest weather of the winter this week, which should boost natural gas demand to a record high on Friday, but summer gas futures briefly traded over winter futures as the market starts to look to the next season.
Despite the frigid weather, U.S. natural gas futures dropped about 8% this week because the latest forecasts called for warmer weather over the next two weeks than previously expected.
Those changes in weather forecasts caused gas futures for April 2022 to briefly trade over March 2022 on Thursday and Friday for the first time since the contracts started trading in 2009.
March is the last month in the gas industry’s winter storage withdrawal season and April is the first in the summer storage injection season.
“Summer traded over winter!!!,” Robert Yawger, executive director of energy futures at Mizuho, said in a report, noting the unusual trade.
The gas industry calls the March-April spread the “widow maker” because rapid price moves resulting from changing weather forecasts have knocked some speculators out of business, including the Amaranth hedge fund, which lost over $6 billion on gas futures in 2006.
That is a massive narrowing of the spread, which hit a record $1.80 in early October when the markets worried about tight U.S. gas supplies during the winter because stockpiles were more than 6% below normal and output was slipping.
Now, however, U.S. inventories are about 1% above normal for this time of year after record output and mostly mild weather in December.
Cold temperatures for the rest of January, however, were expected to cause those stockpiles to slip below normal levels again in coming weeks as homes and businesses crank up their heaters.
The market uses the March-April spread to bet on the winter heating season when demand for gas peaks.
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