While October natural gas futures traded between technical support levels, the closely watched March-April spread has narrowed early in the fall season, signaling less concern about adequate winter storage levels.
“October is still mired in a horizontal channel formation between $1.99-2.42/MMBtu and the classic overbought/oversold indicators are all neutral,” said NGI’s Patrick Rau, senior vice president of Research & Analysis. Those indicators include slow stochastics and the Relative Strength Index that traders use to gauge valuation and momentum.
The prompt-month New York Mercantile Exchange (Nymex) contract broke below its 20-day moving average of $2.230 on Monday, settling down 10.5 cents day/day at $2.170. In early trading Tuesday, the contract pushed above that moving average, trading around $2.243.
Rau noted that in addition to trading within a horizontal channel, the October contract has been contained within its 20-day Bollinger Band, or a sort of moving statistical bell curve.
A bullish storage report on Thursday above that simple moving average, but “an overtly bearish near-term September weather backdrop could postpone upside” for the contract, according to EBW Analytics Group senior analyst Eli Rubin.
“Weather-driven demand remains dismal with the coolest September in over a decade,” he said. In addition, Tropical Storm Francine could potentially strengthen into a hurricane and threaten LNG terminals on the northwestern Gulf Coast, he said. Hurricane Beryl, which hit the Texas coast in July and shut down the Freeport liquefied natural gas terminal for more than a week, led to estimated demand losses of around 50 Bcf, Rubin said.
Storage Still High
“October may not have a clear sense of direction among traders these days, but that is not the case for the March-April 2025 spread, aka the ‘widow maker,’” Rau said. The spread has been in steady decline since mid-June, falling from 29 cents in mid-June to 12 cents on Monday, Rau said.
March as a winter month should price at a premium to April, a shoulder month. “The lower the spread, the less the market is concerned about a supply shortage coming out of the winter.”
Rau noted it’s not a coincidence that the March-April spread started to shrink after concerns about a delay in the construction of the Golden Pass LNG terminal surfaced in early June.
The project’s joint venture partners ExxonMobil and QatarEnergy guided for commissioning to start in the first half of 2025. Timelines filed with the Federal Energy Regulatory Commission maintained that schedule, even as a contractor went bankrupt and laid off 4,000 workers. Flooding has also slowed work.
In August, ExxonMobil management confirmed what the market had guessed – the ramp up of operations had slipped to the second half of 2025.
“That delay means Golden Pass won't be fighting for supply during the peak of summer next year, which means supply coming out of winter 2024/25 is a bit less of a concern,” Rau said.
Another factor behind the narrower spread is abundant storage levels with two months left to the injection season before winter, according to Mizuho Securities USA LLC Energy Futures Director Robert Yawger.
Lower 48 gas inventories stood at 3,347 Bcf after a 13 Bcf injection during the week ended Aug. 30, or about 11% above the five-year average.
[Lower 48 Natural Gas Market Fundamentals: Join NGI’s Patrick Rau, senior vice president of Research & Analysis, in a forward-looking episode of NGI’s Hub & Flow podcast to hear the latest estimates for natural gas production growth in 2025.]
“The ‘widow maker’ is much farther down the line this year than it was last year,” Yawger said, “with the storage surplus versus last year and the five average both at juicy premiums, though they have been reduced somewhat in recent weeks.”
Short Positioning
Professional speculators added to natural gas net short positioning for the week ending Tuesday, Sept. 3, according to Friday’s Commodity Futures Trading Commission Commitments of Traders report.
Speculators shed 18,024 long positions and 142 short positions in the week, according to StoneX Financial Inc.’s Thomas Saal, senior vice president of energy. That left the traders with 17,882 fewer net long positions in the week, he said.
Mobius Risk Group analysts characterized the shift in Nymex net interest as “relatively steady” in the week ending Sept. 3, with net positioning landing at an equivalent of negative 675 Bcf of natural gas.
