Following through on the previous day’s rally, natural gas futures were trading higher early Tuesday as production declines continued to provide support for prices. The June Nymex contract was up 6.1 cents to $1.844/MMBtu at around 8:40 a.m. ET.

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The gains in Monday’s session appeared to result from further production declines triggering a short covering rally, according to NatGasWeather.

“The weekend weather data remained solidly bearish and therefore wasn’t viewed as the reason for Monday’s gains,” the forecaster said. “The latest overnight data was little changed with the 15-day forecast, maintaining a bearish setup overall due to only localized coverage of highs reaching the 90s.

“…For today’s trade, we look to see if July 2020 prices can reclaim $2.00 after briefly exceeding it Monday. Production data will be closely scrutinized by the natural gas markets going forward to see if weekend production losses hold.”

On the demand side, recent readings of liquefied natural gas (LNG) feed gas flows have shown volumes scaling back in anticipation of cargo cancelations, according to Energy Aspects.

“With market soundings suggesting that at least 30 cargoes will be canceled in June and more than six this month, flow data indicate a perceptible shift in utilization already taking place,” the firm said. “This fall in feed gas is happening in anticipation of large-scale June cancelations.

“…One of the biggest issues facing the North American natural gas market this injection season is how these cargo cancellations will weigh on Henry Hub pricing. Although the effects of these cancellations could be partially offset by the large-scale associated production declines that are currently underway, the 30-plus cargoes that market soundings suggest will come offline next month…will be incredibly consequential to Henry Hub prices.”

Meanwhile, June crude oil futures were trading 71 cents higher at $32.53/bbl at around 8:40 a.m. ET.

“Just when everyone was getting prepared for oil to go back down to zero, the other shale dropped,” Price Futures Group analyst Phil Flynn said in a note to clients early Tuesday. “The coronavirus demand drop in demand forced what is now being confirmed by the Energy Information Administration as the most significant shale production setback ever.

“…This record pullback in production comes as oil demand is coming back faster than anticipated. China is reported at pre-virus demand levels, and Europe and the U.S. are seeing sharp increases in oil demand. Low oil prices may be greasing the wheels for fast economic recovery, but we had better enjoy it, because we most likely will have a big price spike” as a result of “some long-lasting damage to some oil producers.”

June RBOB gasoline was up about 1.0 cent to $1.0359/gal as of 8:40 a.m. ET.