It was a rather exciting August natural gas contract expiry, as the contract expired up around a percent and a half as long-range forecasts remained supportive and EIA data yesterday was quite bullish as well.
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It was very clear that a strong August expiry dragged the rest of the strip up higher, as later contracts sold off into and after the settle and the August contract logged by far the largest gain on the day.
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The result was that the Q/V August/October spread went off the board with quite a spike as well, even after it fell significantly the last few days beforehand.
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Overall, though, today's trading day fit well within our expectations. Our Afternoon Update yesterday highlighted that the September contract would remain within the $2.75-$2.8 range that it did almost perfectly today (actual range was 2.757-2.597).
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Our Morning Update discussion showed this too, even though forecasts were generally the same, and our Note of the Day highlighted why we expected $2.8 to remain firm resistance.
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As we have continued to highlight through the week, the afternoon Climate Prediction Center forecasts ticked warmer as well, continuing to move towards our ideas.
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Headed into the weekend, traders are closely watching recent production estimates as well as forecasts for heat returning in the first half of August and how the natural gas strip is likely to act with the September contract as prompt. In our Pre-Close Update we broke down how we expected forecasts to trend over the weekend as well as how natural gas prices would likely react, putting today's flat price and spread movement in the context of shifting supply/demand balance and weather expectations.
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