‘Widowmaker’ Natural Gas Spread Doubles as Traders Eye Winter

(Bloomberg) -- A natural gas trade known as the widowmaker because of its volatility is once again in focus amid concerns about the level of U.S. inventories as the country get closer to winter.

The spread between March and April futures -- essentially a bet on how tight supplies of the fuel will be at end of North American winter -- jumped to a new high, rising 18% at 2:57 p.m. in New York. In other words, buying drove March futures way above gas for delivery the following month.

The move was just part of the trading frenzy Wednesday as the most active futures contract in New York hit a seven-year high, closing 7.6% higher at $4.91 per million British thermal units. Prices have been boosted by intense heat this summer in many northern hemisphere countries, while in the U.S., production has remained subdued, even faltering recently amid disruption from Hurricane Ida.

With several months to go before the U.S. enters its time of peak consumption for natural gas, there’s plenty of time left for surprises for both supply and demand. The previous spread for the contracts that expired in March and April lived up to the widowmaker moniker: it collapsed in December when it became clear that the winter of 2021 wouldn’t be bullish after all.

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