Inventory Levels And Near Term Price Impact
We must, however, view this within the larger context of our current inventory levels. As of this report, total working gas in storage stands at approximately 2,150 Bcf, which is still over 400 Bcf, or about 23%, above the five-year average for this time of year. This significant surplus will likely cap any major price rallies in the coming weeks. Looking forward, we are seeing production finally begin to decline, with recent rig counts from Baker Hughes showing a drop of 5% since the start of the year. This pullback, combined with consistently high demand from LNG export facilities now averaging over 14.5 Bcf per day, creates a supportive backdrop for prices later in the year. The market is weighing the immediate inventory glut against this future tightening. A key variable remains the weather as we exit the winter heating season. Forecasts pointing to a late-season cold snap in early April could trigger another significant storage draw and surprise the market again. We saw a brief price spike in similar shoulder-season conditions back in April of 2025, reminding us how sensitive this market is to weather surprises. Given these conflicting signals, we expect volatility to increase. Traders should consider purchasing options that benefit from price movement, such as straddles on the May and June contracts, as the market decides whether the high storage or the declining production will dominate price action. Implied volatility is still reasonable, offering a good entry point for these positions.Calendar Spreads For Later Year Tightening
Another strategic play is to look at calendar spreads to capitalize on the tightening supply outlook for later in the year. We could establish positions that are short the May ’26 contract and long the January ’27 contract. This trade benefits if the market prices in a tighter supply-demand balance for next winter, causing the back end of the futures curve to rise more than the front. Create your live VT Markets account and start trading now.
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