US natural gas futures were little changed on Tuesday as the latest forecasts for cooler weather and higher heating demand over the next two weeks offset potential declines from the expiration of the front-month options.
Some traders thought the front-month could decline further as sellers of put options were forced to sell their underlying futures to protect themselves from possible losses due to large open interest in the $2, $2.05, $2.10 and $2.15 December puts.
But after falling as low as $2.13 per million British thermal units earlier on Tuesday, front-month gas futures on the New York Mercantile Exchange closed down just one cent at $2.20.
Both the US and European weather models have called for near-normal temperatures through the middle of December. The latest US model issued at noon EST called for cooler weather than the earlier version, however, prompting some short covering, traders said.
Despite flat prices on the front-month, other futures lost some ground.
Calendar 2016 and 2017 strips both fell to fresh all-time lows with production at record levels, storage at record highs and forecasts for a warmer-than-normal winter due to the El Nino weather pattern.
March 2016 futures also hovered near an all-time low, trading at a discount of less than 1 cent to the April 2016 contract for the second day in a row.
March-April is usually the widest month-to-month spread of the year since it marks the end of the winter heating season and the start of spring, making it widely traded. It is known as the widow-maker because changing weather forecasts can quickly cause it to turn against speculators.
Speculators continued to believe prices could fall further with the $2 January 2016 puts and $1.50 and $1.75 March 2016 puts among the most active options.