Henry Hub natural gas futures for April are trading at US$2.49/MMBtu as of 1:00pm EDT Thursday afternoon. Total US demand decreased week-over-week, with milder weather taking hold, while production remained above 90 bcf/d. After reaching a closing high of US$2.562/MMBtu on Tuesday, March 16th, prompt-month futures have again fallen below US$2.50/MMBtu. Continued low prices have the potential to boost demand for natural gas consumed by electric power plants to generate electricity (power burn), as well as disincentivize production, which could tighten the supply/demand balance. The EIA estimated working gas storage was 1,782 Bcf for the week ending March 12th, 2021, following a withdrawal of 11 Bcf. This bearish report came in at the low end of market estimates ranging from 12-17 Bcf. Storage levels are now 12.4% below year-ago levels and, relative to the 5-year average, 5% less. This is the third consecutive bearish withdrawal, relative to market expectations, as we move closer to the end of withdrawal season. As the weather throughout the continental US has been somewhat colder this week, the market is expecting a 17 Bcf for the week ending tomorrow.
In other news, the EIA reports U.S. exports of liquefied natural gas (LNG) to Asia increased 67% in 2020 compared to 2019. LNG was exported to 38 countries in 2020, and Asia passed Europe to become the main export destination for growing LNG exports. Currently, the US is behind Qatar and Australia in terms of LNG export, where the three countries export 46.3, 77.8 and 75.9 Million metric tons per annum (mtpa), respectively. Last month, Qatar, Asia’s largest supplier of LNG, signed a deal that will increase its LNG output to 110 million mtpa by 2026.
In Canada, March spot market prices are down compared to the week prior as AECO is averaging $2.65/GJ month-to-date, and the Dawn spot price is averaging $3.07/GJ. Prompt-month futures for AECO are trading at C$2.45/GJ, while Dawn is trading at C$2.88/GJ. Prices continue to track downward, with week-over-week decreases of $0.20/GJ and $0.22/GJ at AECO and Dawn, respectively. Canadian natural gas storage for the week ending March 12th, 2021 was sitting at 332 Bcf, after an overall withdrawal of 18 Bcf. This withdrawal decreases storage inventories to 70 Bcf below the 5-year average and 8 Bcf below storage levels last year at this time.
– Karyn Morrison, Energy Advisor / Grace Wilton, Senior Energy Advisor
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