US natural gas futures fell over 2% on Thursday to their lowest in 24 years for the second straight day on a smaller-than-expected weekly storage draw and concerns higher crude prices could boost gas production from US shale oil fields.
Crude prices soared on Thursday after US President Donald Trump said he expected Russia and Saudi Arabia to announce a major oil production cut.
"This market's negative response to today's Trump tweet appeared related to the possibility that higher oil prices could boost US oil production sustainably in the process of spitting out more associated gas output than had previously been expected," said Jim Ritterbusch, president of Ritterbusch and Associates in Galena, Illinois.
Front-month gas futures for May delivery on the New York Mercantile Exchange fell 3.5 cents, or 2.2%, to settle at $1.552 per million British thermal units, their lowest since August 1995. The contract also closed at its lowest since August 1995 on Wednesday.
That move lower came despite forecasts for more US heating demand next week than previously expected.
"Despite a move in weather forecasts to include some early spring chill in the eastern United States next week, the market remains unfazed," said Daniel Myers, market analyst at Gelber & Associates in Houston.
The US Energy Information Administration (EIA) said utilities pulled 19 billion cubic feet (bcf) of gas from storage during the week ended March 27.
That was less than the 24-bcf draw analysts forecast in a Reuters poll and compares with an increase of 6 bcf during the same week last year and a five-year (2015-19) average reduction of 19 bcf for the period.
The decrease for the week ended March 27 cut stockpiles to 1.986 trillion cubic feet (tcf), 17.2% above the five-year average of 1.694 tcf for this time of year.
Even before the coronavirus started to cut global economic growth and energy demand, gas was trading near its lowest in years as record production and months of mild winter weather enabled utilities to leave more fuel in storage, making shortages and price spikes unlikely.
Looking ahead, gas prices in late 2020 and 2021 were trading at much higher levels than the front-month on expectations demand will rise later this year once governments loosen travel and work restrictions. Calendar 2021 has traded at a premium over calendar 2022 for 16 days and over 2025 for six days.