Traders said that warm weather will cut heating demand and allow utilities to leave more fuel in storage, trimming the vast inventory deficit. Stockpiles are now 19 percent below normal for this time of year and at their lowest level in 13 years. Declines over the past month allowed March's premium over April to fall from an all-time high of $1.745 per million British thermal units (mmBtu) on November 14 to a record low of just 14.4 cents on Wednesday, a decline of 92 percent in just seven weeks.
In September, that March premium over April fell to a near three-year low of just 23 cents/mmBtu. The gas industry calls the March-April spread the "widow maker" because rapid price moves resulting from changing winter weather forecasts have knocked some speculators betting on the contracts out of business, such as the Amaranth hedge fund in 2006.
March is the last month in the gas industry's winter storage withdrawal season and April is the first month in the summer storage injection season. Since mid-November, the combination of changing weather forecasts and low stockpiles for this time of year has kept futures volatility near its highest in years.
The spread between the intraday high and low for the front-month has topped 5 percent of the previous session's close in 32 of the past 35 sessions. During that time, the difference between high and low prices has averaged 33 cents, versus an average of 7 cents during the prior nine months.