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.
(Click on image to enlarge)
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.
In the morning we 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.
Comments
Log in or sign up to join the conversation.