Coming off a strong rally that coincided with a chaotic plunge in crude prices a day earlier, natural gas futures pulled back slightly in early trading Tuesday. The May Nymex contract was off 3.2 cents to $1.892/MMBtu at around 8:45 a.m. ET.

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The overnight weather data added a small amount of demand for late this month into early May, according to NatGasWeather.

“Demand has been added since late last week as a series of slow-moving weather systems/cool shots sweep across the Great Lakes and Northeast,’ the forecaster said. “These systems are far from frigid but are strong enough to keep modest demand for heating going. However, cooling over the Northeast will also at times push into the Southeast and Florida to prevent early season heat from setting up.”

The gains in weather-driven demand the past several days likely aided Monday’s rally, but “the primary story remains the collapse in oil prices that portends further losses in oil and gas rigs” and a “noticeable decrease in associated natural gas production.”

EBW Analytics Group analysts similarly pointed to the “startling” plunge in the crude oil market Monday, which saw the May WTI contract close deeply in the negatives, as the major catalyst for the rally in natural gas.

“This stunning development was due largely to dynamics relating to contract close-out,” the EBW analysts said, noting that the more heavily traded June contract did not see such a heavy drop-off. “Yesterday’s collapse, however, demonstrates dramatically that crude storage is nearly maxed out. Producers will be required to make massive production cuts soon, reducing output of associated gas.

“…Volatility is likely to be high again today. Natural gas could give back some of its gains if crude rebounds. The prospect of production cuts, though, is likely to keep natural gas prices elevated, limiting downside price risk and opening the door to further gains.”

Genscape Inc. senior natural gas analyst Rick Margolin said the negative WTI prices confirm “the lack of demand and storage space for physical oil.”

As of early Tuesday the May WTI contract continued to trade negative, trading at minus $4.34/bbl at around 8:45 a.m. ET. The June contract was trading at $15.77/bbl, down $4.66.

The Railroad Commission of Texas “is set to meet later today, with mandated shut-ins being within the realm of possibility,” Margolin said. “Failing that, economic shut-ins are plausible should this price environment continue.”

May RBOB gasoline was trading about 9.4 cents lower at 57.4 cents/gal at around 8:45 a.m. ET.