(Reuters) - For a brief moment this week, Canadian natural gas was basically free.

Eddie MacDonald fills his truck with gas in Wandering River, Alberta, after evacuating Fort McMurray due to raging wildfires on May 6, 2016. REUTERS/Topher Seguin

While oil producers fretted over what production shut-ins, caused by a massive Alberta wildfire, would do to the price of Canadian crude oil, those same producers are big buyers of natural gas, and without them the price dropped to just C$0.05 per thousand cubic feet (mcf) on Monday. A shut-in is when the product is available but not able to reach the market.

“It was essentially free at the lows on Monday,” said Martin King, an analyst at Alberta energy advisory FirstEnergy Capital, noting that these were the lowest AECO prices on record going back to at least 1985.

Oil sands companies around the Canadian energy center of Fort McMurray, Alberta, began to restart operations on Tuesday after the wildfire forced a week-long shutdown.

During the wildfire shutdowns, producers were not using gas to fuel cogeneration power plants that generate electricity and the steam used to cook the oil sands to produce crude.

As a result, the Canadian benchmark AECO hub in southeast Alberta averaged less than C$0.50/mcf on Monday, at one point dropping to an intraday low of just 5 cents, King said.

Natural gas prices have rebounded somewhat. With the return to production of one oil sands cogeneration plant at the Syncrude project this week and the expected restart of others in coming days, AECO prices have already climbed to around C$1/mcf.

But the high level of gas in storage after a mild winter means prices are expected to remain relatively cheap for the rest of the year, according to analysts.

AECO prices averaged C$4.47/mcf in 2014 and C$2.78 in 2015, but just C$1.62 so far in 2016, according to FirstEnergy.

To avoid filling Alberta’s inventories to their maximum capacity, some drillers will likely have to cut output later this summer if they are not able to sell more gas to the already-oversupplied U.S. markets.

“Some producers will likely be forced to shut in some output because they won’t get a decent price for their product, and some of the gas that is produced will probably make its way to the oversupplied U.S. market,” said Kent Bayazitoglu, director of market analytics at energy consulting firm Gelber & Associates in Houston.

The biggest gas producers in Alberta include units of Encana Corp ECA.TO, Repsol SA REP.MC, Canadian Natural Resources Ltd CNQ.TO, Cenovus Energy Inc CVE.TO and Husky Energy Inc HSE.TO.

Canadian Natural is planning to shut in an additional 40 million cubic feet per day (mmcfd) by the end of 2016 because of low gas prices, a spokeswoman said, adding the decision was made before the wildfire outages. Canadian Natural said last week it already had about 43 mmcfd of gas shut in due to low gas prices.

“We’ve seen a couple of small producers in Alberta shut-in gas production due to low prices in recent months, but Canadian Natural’s planned shut-ins may only be the tip of the iceberg based on how low AECO prices are,” said Richard Redash, managing director, natural gas, at energy consultancy PIRA.

LOW PRICES ATTRACT U.S. BUYERS

The low prices attracted U.S. buyers. So far in May, net imports of gas from Canada have averaged 5.6 billion cubic feet per day (bcfd), up from 5.4 bcfd in April. That is an increase of about 15 percent compared with the same period in 2013-2015, according to Thomson Reuters Analytics.

FirstEnergy estimated the loss of oil sands usage due to the fires cut gas demand by as much as 0.6 to 0.9 bcfd. At the high end of this range, this is about 25 percent of all Alberta gas demand for this time of year. Much of the gas not used will go to Canadian storage facilities, they said.

The problem is that storage in Alberta, as in the United States, is already at record levels after a mild winter.

Utilities pulled only 16 bcf out of Alberta storage between Nov. 1, 2015, and March 31, 2016. That compares with about 111 bcf withdrawn during the winter of 2014-2015 and 334 bcf during the polar vortex winter of 2013-2014, according to FirstEnergy data.

The amount of gas in inventory in Alberta currently stands at around 428 bcf, putting current storage near the province’s maximum capacity of 470 bcf, FirstEnergy said.

To avoid overfilling inventories going forward, FirstEnergy said drillers, especially those that are unhedged and exposed to spot prices, will have to shut in an estimated 0.6 to 0.8 bcfd of gas production during the summer and autumn.

Canadian drillers have already cut the number of rigs drilling new oil and gas wells to just 36, lowest number since at least 2000, according to services company Baker Hughes Inc BHI.N.