The prompt month August natural gas contract sold off another percent and a half today, giving traders the lowest prompt nat gas settle since May 9th. 

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This fits perfectly with expectations provided to subscribers in our Weekly Natural Gas Update on Monday, where we outlined why we expected any weak bounces early in the week to fail and why prices would likely test $2.75 support (where they settled today).  

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Yesterday our intraday Note of the Day also explained why a $2.75 test was likely coming sooner rather than later, and we also forecast for it to hold due to tighter weather-adjusted power burns.  

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Overnight guidance last night trended modestly less hot right in line with our expectations, and that appeared to combine with continued elevated production to send prices into resistance.  

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Initially, the whole strip was declining around equally, though below $2.77 we began to see increasing prompt isolation which continued into the settle.  

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The result was that the V/F October/January natural gas contract spread settled at its widest level since April 12th, as the winter contract found support into the settle. 

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Such a move in the spread makes sense given lingering concerns about low storage levels and tighter weekly storage data. At the front of the strip we have seen widening as well, though, as slightly cooler risks across the Midwest and East have been partly priced in by the Q/V August/October spread.  

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We used this strip analysis yesterday in our Thursday Note of the Day to identify that $2.75 support would hold into the weekend, providing subscribers a target today when prices declined off those cooler weather runs.  

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