Collapse in U.S. natgas prices cut widow maker spread to 20-month low

Value Exchange International

01/12/2021 15:01

Dec 1 (Reuters) - U.S. natural gas futures dropped to a
three-month low on Wednesday along with a collapse in oil
prices, cutting the 2022 March-April spread to its lowest in 20
months as gas output rose to record highs and stockpiles remain
healthy for the winter.
    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.
    The premium of gas futures for March over April  NGH22-J22 
fell to 28 cents per million British thermal units (mmBtu), the
lowest since March 2020.
    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 over 6% below normal and output was slipping.
    Now, however, U.S. inventories were just 2% below normal for
this time of year after mostly mild weather in October and
November allowed utilities to stockpile huge amounts of gas.
 EIA/GAS 
    Output in the U.S. Lower 48 states, meanwhile, averaged a
record 96.5 billion cubic feet per day (bcfd) in November, up
from 94.2 bcfd in October, according to data provider Refinitiv.
That topped the prior all-time monthly high of 95.4 bcfd in
November 2019.
    In addition to the narrowing March-April spread, the premium
of futures for November over October 2022  NGV22-X22  rose to 10
cents, their highest since April 2011.
    The market uses the March-April and October-November spreads
to bet on the winter heating season when demand for gas peaks.
    The entire global energy complex collapsed over the past
week on concerns demand will fall as coronavirus cases rise,
causing a supply glut.
    Oil prices  CLc1   LCOc1  fell to their lowest since August
earlier on Wednesday.  O/R 

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UPDATE 1-U.S. natgas pares gains, still at 7-year high as global
prices soar     urn:newsml:reuters.com:*:nL1N2QU14C
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 (Reporting by Scott DiSavino; Editing by Mark Porter)
 ((scott.disavino@thomsonreuters.com; +1 332 219 1922; Reuters
Messaging: scott.disavino.thomsonreuters.com@reuters.net))
 
((For Refinitiv, formerly known as Thomson Reuters Supply Chain & Commodities Research (SC&CR), see: cpurl://apps.cp./cms/?pageid=usa-gas))