NEW YORK: US natural gas futures slipped on Monday due to a drop in oil prices despite mostly steady forecasts for hotter-than-normal weather to continue over the next two weeks.

Front-month gas futures fell 6 cents, or 1.5%, to $4.080 per million British thermal units (mmBtu) at 8:49 a.m. EDT (1249 GMT).

Oil prices dropped 4% on Monday, extending last week’s steep losses on the back of a rising US dollar and concerns new coronavirus-related restrictions in Asia, especially China, could slow a global recovery in fuel demand.

Last week, gas speculators cut their net long futures and options positions on the New York Mercantile and Intercontinental Exchanges for a fourth week in a row for the first time since April as some buyers cashed in their gains after the front-month soared to a 31-month high.

Rising gas prices in recent months and an 11% drop in US crude futures over the past week or so helped cut the premium of oil over gas to its lowest since December 2020. Over the last several years, that premium has prompted US energy firms to focus most of their drilling activity on finding more oil instead of gas because crude was a more valuable commodity.

The oil-to-gas ratio, or the level at which oil trades compared with gas, fell to 16-to-1. That is below the 21 times oil has traded over gas so far in 2021 and compares with crude’s average premium of 19 times over gas in 2020 and a five-year average (2015-2019) of 20 times over gas. Crude, however, remains more valuable than gas. On an energy equivalent basis, oil should trade only six times over gas.

In the power market, the Electric Reliability Council of Texas (ERCOT), grid operator for most of the state, projected hot weather this week would push peak demand over the current high for the year of 72,856 megawatts (MW) on July 26. The forecast peaks, however, were expected to fall short of the grid’s all-time high of 74,820 MW in August 2019.

Data provider Refinitiv said gas output in the US Lower 48 states rose to an average of 92.0 billion cubic feet per day (bcfd) so far in August from 91.6 bcfd in July. That was still well below the all-time high of 95.4 bcfd in November 2019.

With hotter weather expected, Refinitiv last week projected average gas demand, including exports, would rise from 93.9 bcfd this week to 95.9 bcfd in next week as power generators burn more fuel to meet rising air conditioning use.