The November natural gas contract shot higher today, gapping up modestly last evening before continuing higher this morning on strong physical prices and much colder forecasts relative to the end of the last week. In the end the November contract led a rally of 4% on the day.
The role of weather was clear in the isolation the November contract saw in the rally, with other contracts not participating nearly as much.
The result was a significant narrowing in the X/Z November/December spread.
Meanwhile, the February/March contract spread did not hit new highs, as the rally was focused by far the most right at the front of the strip.
Much of the rally can be attributed to significantly colder weather forecast trends over the weekend. Though we had initially been looking for long-range models to warm, they did an about-face and trended significantly colder.
The Climate Prediction Center picked up on these colder risks in their most recent update as well, showing more widespread high confidence odds of colder weather in the 6-10 Day period.
