Henry Hub natural gas futures for February are trading at US$2.703/MMBtu as of 1:15pm EDT Thursday afternoon. Price volatility persisted this week, with shifting weather patterns, lower production and higher exports continuing to be the driving factors. The prompt-month contract reached a near six week high of US$2.899/MMBtu on January 12 before closing at US$2.727/MMBtu yesterday. The markets are cautiously watching the possible onset of a polar vortex which could bring colder temperatures at the end of the month and early February. The EIA estimated working gas storage was 3,196 Bcf for the week ending January 8, 2021 following a withdrawal of 134 Bcf. This report is slightly higher than market expectations of 128-132 Bcf,but was not enough to influence a push for higher prices. Storage levels are now 4.1% above year-ago levels and, relative to the 5-year average, 7.3% greater.
In Canada, prompt-month futures for AECO are trading at C$2.90/GJ, while Dawn is trading at C$3.22GJ. Prices for both AECO and Dawn rallied higher week-over-week by C$0.26/GJ and C$0.06/GJ, respectively. The January spot rate at Dawn has averaged C$2.93/GJ month-to-date and AECO has averaged C$2.49/GJ. Despite strengthened exports, demand has been weaker than expected due to warmer-than-average temperatures. Western Canada storage still sits around 470 Bcf, which is 50 Bcf above the five-year average.
According to the EIA report issued yesterday, United States natural gas production fell 2% in 2020 from 2019 levels, in response to COVID-19. The EIA estimates annual U.S. marketed natural gas production will decline another 2% to average 95.9 billion cubic feet per day (Bcf/d) in 2021. This will reverse in 2022, when the EIA estimates that natural gas production will rise by 2% to 97.6 Bcf/d.
– Karyn Morrison, Energy Advisor
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