Some interesting developments in the trade this spring. 1) as a contract expires there is a substantial premium afforded to the upcoming prompt. This premiums sets the stage for a high before the weakness and selling smacks the prompt back into the range (discussed here and the Daily) that has held the market for months. 2) declines have taken the market into range and has created a complacency to the trade (note the Bollinger Band study below).
When this complacency (lack of volatility) occurs in the market- I is not likely to last for very long and creates an environment inducing potential volatility. The difference between the high 2 standard deviation band the lower band is under $.37. It is unlikely that this will hold for very long and the markets premium afforded to the upcoming months and winter will all pressure a resolution to the complacency. Should prices break down and the premiums afforded to the differed contracts come down- the lower band will be broken ($1.579 this week) and volatility is likely to increase. Should prices break above the high band ($1.945 currently), this will likely add significant volatility. Prices have not brought any indications of which scenario will occur — hence the complacency.