After a strong rally for the September natural gas contract, front-month natural gas prices have spiked even further as this September contract rolled into a higher-priced October one. The chart below is from FTAlphaville.
Yet despite the bets of some hedge funds, this higher pricing could be in for a tumble. While the oil-to-gas ratio remains favourable for natural gas’s long-term price outlook, in the near-term, winter storage capacity is near maximum levels.
Should some of this stored gas be dumped into the market prematurely, it could slam the front-month contract. Likewise, anything related to the front-month, such as the United States Natural Gas Fund ETF (UNG), could be under pressure.
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