NatGas 'Widowmaker' Spread Turns Negative At Earliest Point In Nearly A Decade

A natural gas trade, known as the "widowmaker" due to its extreme volatility, has gone negative at the earliest point in the season in nine years. This signals that the market has abandoned expectations for higher prices across the Lower 48 this winter.

"The widowmaker has gone negative," Bloomberg's Will Wade wrote in an overnight note. 

Wade said, "The spread between March and April natural gas futures flipped last week, marking the earliest point for such a seasonal turn in nine years." 

The widowmaker trade (March-April 2025) spread traded negative or into contango last Tuesday. That compares with Dec. 13 for the March-April 2024 spread, Jan. 25 for the March-April 2023 spread, and Feb. 18 for the March-April 2022 spread, according to seasonality data from Bloomberg. 

The closely watched trade is known for its high volatility and represents a bet on how tight supplies will be at the end of the North American winter. The unusual contango this early in the heating season reflects above average temperatures across the Lower 48 for the next few weeks. 

At the start of last week, Goldman's Thomas Evans penned a note to clients, suggesting the multi-week cold blast was "failing to persist." 

The latest Bloomberg forecast shows the Lower 48's two-week temperature outlook to trend above a 30-year average after this weekend, which will dent heating demand. 

"Summer is trading at a premium to winter just five days after Thanksgiving. In a rational world, it is logical to assume that summer would never trade over winter," Bob Yawger, director of energy futures at Mizuho, wrote in a note. 

All it takes is one polar vortex split to spill cold Arctic air into the Lower 48 region, reversing the bearish outlook on the NatGas market. That's why the spread trade is dubbed a widowmaker.