US natural gas futures for March 2018 fell below April 2018 on Friday, putting the contracts into contango for the first time in the 10 years they have been trading. Traders use the March-April spread to bet on changes in winter weather forecasts.
But with the season mostly over, analysts said the potential for price spikes over the next couple of months was lessening because production was near record highs and the latest forecasts called for seasonal weather for the rest of the winter. The swing of the March-April spread into contango possibly signals the completion of the current price downturn, said Jim Ritterbusch, president of Chicago-based energy advisory firm Ritterbusch & Associates, in a note.
In just over one week, gas futures have plunged 29 percent on forecasts for less cold weather in February. Futures fell from a high of $3.661 per million British thermal units on January 29, the highest since December 2016, to a low of $2.617 on Friday, the lowest since December 2017.
The industry calls the March-April spread the "widow maker" because price rapid moves based on changing winter forecasts have put many speculators out of business in the past. The 2018 March and April contracts started trading in 2008.
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