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Natural Gas Options Predicts Challenging Winter for the U.S

A wild combination of the Winter weather, lower storage levels, and the additional complexities attributed to the COVID-19 is considered to be consequential. The United States natural gas market is expected to witness one of its most challenging in years due to these factors.

Starting with the indicators affirming the challenging Winter is the positioning of traders appears to have started way earlier than the usual time. August 2021 was observed as the most active August in years associated with natural gas options trading. Generally, August is a lowkey month. Therefore the surprising turn of events with powerful record activity levels concerning firms. The unpredictability associated with what comes next has instigated firms to set up robust risk management programs for the Winter.

The open interest also appeared to elevate enormously through November to March, with 750,000 contracts already in place. This is the highest open interest record since 2017, which was considered to be the most active year in the history of natural gas options.

Winter in general, are crucial for natural gas traders as it is relatively harder to predict and make accurate long-range estimates of the weather conditions. The assumptions of how exactly the potentially freezing temperatures are going to influence gas demand and production are challenging.The Winter of 2021 holds a specific significance owing to the drastic variations in demand caused by the COVID-19. Additionally, the volatility metrics suggest the predictability of weather impact to be harder than before.

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