US natural gas futures jumped almost 10% on Monday to a near six-week high, and fell back slightly on Tuesday, on worries that gas production will decline as drillers shut oil wells in shale basins due to the collapse in crude prices to below zero for the first time. Those oil wells produce a lot of gas.
Traders also cited forecasts for cooler weather and higher heating demand next week even as long-term forecasts call for gas use to drop due to coronavirus lockdowns.
The rapid collapse of US oil futures this year – down over 130% – caused crude’s premium over gas to turn into a deficit for the first time ever.
Looking ahead, gas futures for the balance of 2020 and calendar 2021 were trading much higher than the front-month on expectations demand will jump as the economy snaps back once governments loosen travel and work restrictions.
PRICING
Front-month U.S. natural gas futures on Tuesday fell 0.103 cents to $1.821 per MMBtu.