On December 24, the natural gas futures for February 2019 closed at a premium of ~$0.35 to the February 2020 futures. On December 17, the futures spread was at a premium of $0.41. On December 17–24, the natural gas February futures fell 0.9%.
Sentiments for natural gas
The market sentiment toward natural gas’s demand-supply situation is reflected in the futures spread. The futures spread and natural gas prices tend to move in the same direction.
In the past five trading sessions, the premium contracted and natural gas prices fell by almost one percentage point. The premium might have contracted due to the expectation of lower total degree days in the past, which we discussed in Part 1. In the previous part, we saw that natural gas inventories are at a double-digit deficit in percentage terms compared to their five-year average—a factor that might push the spread higher in the coming days.
As of December 24, the natural gas futures contracts for delivery between February and May 2019 were priced in descending order, which is a positive development for ETFs that follow natural gas futures including the ProShares Ultra Bloomberg Natural Gas ETF (BOIL) and the United States Natural Gas ETF (UNG).