U.S. natural gas futures dropped almost 5% to a near two-week low on April 5 on rising production and forecasts for milder weather and lower heating demand through mid-April than expected before the long Good Friday weekend.

Traders also noted the gas market fell along with the rest of the energy complex. U.S. oil futures dropped 4.6% on April 5.

Front-month gas futures fell 12.8 cents, or 4.9%, to settle at $2.511 per million British thermal units (MMBTU), the lowest close since March 23.

After utilities started injecting gas into storage in late March, which was earlier than usual, speculators cut their net long positions on the New York Mercantile (NYMEX) and Intercontinental Exchanges for a sixth time in a row last week to their lowest since July 2020. That was the longest streak of decreases since December 2019.

Lack of concern that prices will spike anytime soon helped cause futures at-the-money implied volatility, a determinant of an option’s premium, to fall to 28.4%, its lowest since June 2019 for a second day in a row.

That decline comes after implied volatility rose to 115.1% in February during the Texas freeze, its second highest on record. Implied volatility hit a record high of 117.5% in November 2018 due to big changes in winter weather forecasts that caused a rapid increase in prices and the failure and liquidation of commodity trading adviser OptionSellers.com.

Volatility hit a record low of 18.6% in April 2019 on mild summer forecasts and a belief that record production at the time would meet any increase in demand and keep prices in check. Traders noted the 200-day moving average remained a strong price floor or technical level of support. The front-month has not settled below the 200-day since September 2020.

Data provider Refinitiv said output in the Lower 48 U.S. states averaged 92.4 billion cubic feet per day (Bcf/d) so far in April, up from March's 91.6-Bcf/d average but still well below the record monthly high of 95.4 Bcf/d in November 2019.

Refinitiv projected average gas demand, including exports, would slide from 90.5 Bcf/d this week to 89.5 Bcf/d next week as the weather turns milder. That is well below Refinitiv’s forecasts on April 2.

The amount of gas flowing to U.S. LNG export plants, meanwhile, averaged 11.4 Bcf/d so far in April, which would top March’s monthly record of 10.8 Bcf/d.