Crude’s premium over natural gas turned into a deficit for the first time ever caused by the rapid collapse of US oil futures yesterday. Because of this, producers may get triggered to search for gas instead of oil in future months especially if gas demand recovers as expected when the economy snaps back. However, both gas and oil prices, for now, have slumped.
Since the beginning of 2020, US crude futures have tumbled over 150 percent to a record low below minus $37 a barrel. The plunge triggered by the combined impact of a price war between Saudi Arabia and Russia and coronavirus demand destruction.
Due primarily to the pandemic’s demand loss, gas futures were down about 11 percent so far this year. For the past several years, drilling has become the focus for US energy firms on finding more oil in part because crude was much more valuable than gas.
The oil-to-gas ratio on Monday fell to minus 18-to-1. That compares with January’s 6-year high of 31 times over gas. Oil should trade six times over gas on an energy equivalent basis. US producers expected by analysts to cut oil drilling in shale basins as now crude prices have dropped.
