Riding the bullish momentum from the previous session, natural gas futures continued to rally early Tuesday as traders weighed the supply impact from much lower crude prices. The April Nymex contract was trading 6.9 cents higher at $1.847/MMBtu at around 8:30 a.m. ET.

April WTI crude futures had recovered $2.39 to trade at $33.52/bbl as of 8:30 a.m. ET. That followed Monday’s rout, a $10.15 sell-off prompted by reports of a breakdown in supply cut talks between the Organization of the Petroleum Exporting Countries and its allies, and of a price war breaking out between Saudi Arabia and Russia.

Monday’s collapse in oil prices led Genscape Inc. to issue a fully revised production forecast to clients to reflect the new realities in the crude market.

“With the balance of 2020 WTI price shedding $10 compared to our previous forecast, lower expectations for oil output remove about 0.86 Bcf/d of gas from the December 2020 production forecast,” Genscape analyst Ben Chu said in a note to clients early Tuesday. “This accounts for the roughly six-to-eight-month lag between price signals and actual production.

“Cal 2021 production was lowered due to the WTI Cal 2021 strip losing $8 since our last forecast, which pulls more than 2.2 Bcf/d out of the Cal 2021 gas production forecast, and even sharper declines to the 2022 production forecast.”

As for the latest forecast guidance, NatGasWeather characterized the overnight changes as mixed. The American Global Forecast System (GFS) lost 17 heating degree days (HDD), while the European dataset trended colder, adding 13 HDD, the forecaster said.

“Essentially, the markets will be disappointed the GFS lost demand but will be satisfied to see the European gain demand,” NatGasWeather said. However, weather trends could have less significance for traders “as natural gas bulls found new life Monday on the oil markets collapse.

“The overnight data held exceptionally warm late winter conditions through Thursday, followed by a cold shot over the western and central U.S. spreading across the northern U.S. this weekend for a surge in national demand.”

Meanwhile, looking ahead to this week’s Energy Information Administration (EIA) storage report, Energy Aspects issued a preliminary estimate for a 59 Bcf withdrawal for the week ending March 6.

The seasonal dropoff in gas-weighted heating demand “nearly halves the withdrawal rate week/week,” Energy Aspects said. “Power burn and residential/commercial demand are poised to decline by 1.7 Bcf/d and 4.0 Bcf/d, respectively. Had it not been for Permian maintenance, production would have registered a stronger reading than its projected 0.3 Bcf/d week/week decline.”

At around 8:40 a.m. ET, April RBOB gasoline was up about 5.9 cents to $1.1954/gal.