Mentioned yesterday that some of the differed contract to the October contract were at substantial differences. Above is the October contract to the November, while it looked to be converging last week– yesterday’s action took it back to where the spread was at the beginning of Aug. It is clear that the market has some concern about the upcoming winter– regardless of the fundamental conditions. The gap between these two months (premium afforded to November) usually closes in early trade when Nov takes over as prompt. There is an exception to that expectation and will dive into that year later in the week. For now, focus on 2002, 2005 (do not weight 2005 as high due to the tropical influence) and 2013. Either the Nov contract has to come back to the Oct or the Oct has to chase Nov and diminish the premium.
I was expecting the Nov to decline in the seasonal weakness but it did not, in fact, expanded the premium. The market and prices are clearly indicating something but it is too early to tell. Be aware though of these premiums in your trading decisions.
