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US natural gas futures rose on Monday on forecasts for cooler weather and more heating demand over the next two weeks than previously expected and a slowing of output as drillers shut oil wells in shale basins due to the 67% collapse in crude prices since the start of the year.

Those oil wells also produce a lot of gas.

That price increase comes despite long-term forecasts for demand and exports to decline due to government lockdowns to stop the spread of the coronavirus.

Front-month gas futures for June delivery on the New York Mercantile Exchange (NYMEX) rose 7.4 cents, or 3.9%, to $1.964 per million British thermal units at 11:01 a.m. EDT (1501 GMT), putting the contract on track for its highest close in 11 weeks.

Looking ahead, gas futures for the balance of 2020 and calendar 2021 were trading higher than the front-month on expectations demand will jump once governments loosen travel and work restrictions.

That increase prompted speculators to boost their net long positions on the NYMEX and Intercontinental Exchange last week to the highest since April 2019 for a third week in a row.

The US Energy Information Administration (EIA) projected gas production will fall to an annual average of 91.7 billion cubic feet per day (bcfd) in 2020 and 87.5 bcfd in 2021 from a record 92.2 bcfd in 2019 as energy firms cut spending on drilling.

Data provider Refinitiv said average gas output in the US Lower 48 states fell to 89.8 bcfd so far in May, down from an eight-month low of 92.8 bcfd in April and an all-time monthly high of 95.4 bcfd in November.

The EIA projected coronavirus lockdowns will cut US gas use - not including exports - to an average of 83.8 bcfd in 2020 and 81.2 bcfd in 2021 from a record 85.0 bcfd in 2019.

With cooler weather coming, Refinitiv projected demand in the Lower 48 states, including exports, would rise from an average of 84.2 bcfd this week to 88.5 bcfd next week. That compares with Refinitiv's forecasts on Friday of 79.5 bcfd this week and 82.8 bcfd next week.

Even though the coronavirus is reducing gas use, EIA still expects US exports to hit record highs in coming years as more liquefied natural gas (LNG) export plants and pipelines enter service. Still, the agency has reduced its projections on the pace of that growth due to the pandemic.

Copyright Reuters, 2020