August natural gas prices gapped down last evening and were unable to recover today, closing just off the lows as cooler weather across much of the country to finish off July is expected.
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The impact of weather was clear today, with the Q/V August/October spread declining significantly on the day.
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Recent Climate Prediction Center forecasts show how high confidence this cool weather is in the 6-10 Day time period.
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The GFS ensembles in their afternoon 12z run showed widespread cool risks on July 31st as well (courtesy of the Penn State E-Wall).
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This heat has been well-forecast for multiple weeks, as early in the summer we called for cool risks to increase through the month. Our Seasonal Trader Report from early June indicated this well too, as we called for the strong June and forecast early July heat to ease through the month.
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Sure enough, prices have sold off from the June 26th date as well, with the August contract falling from around $2.92 to now around $2.72, in line with the seasonal forecast. As can be seen, much of that move came at the front of the strip, with the H/J March/April 2019 spread falling significantly since mid-June (before spiking last Thursday).
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