Prompt month has rolled over to November and Henry Hub natural gas futures are trading at US$6.75/MMBtu as of 1:00pm EDT Thursday afternoon, down over 20 cents from yesterday’s close of US$6.955/MMBtu. Natural gas futures have fallen, as Hurricane Ida knocked out power to millions in Florida, cutting natural gas demand to produce electricity, and thanks to a larger-than-expected storage injection. US gas production continues to rise, with the EIA expecting US dry gas production to increase to average 99 Bcf/d in the fourth quarter 2022 and 100.4 Bcf/d in 2023. The EIA estimated working gas storage was 2,977 Bcf for the week ending September 23rd, following an overall injection of 103 Bcf, exceeding market expectations averaging 95 Bcf. Back-to-back triple-digit storage injections have helped to narrow the storage deficit. Storage levels are now 5.7% below year-ago levels and, relative to the five-year average, 9.3% less.
The geopolitics of natural gas continues to heighten the risk of elevated domestic prices this winter. With the US becoming the world’s fastest growing liquified natural gas (LNG) exporter, North America is further influenced by global pricing as Europe works to wean itself off Russian natural gas. The European Union is investigating the cause of leaks in the Nord Stream 1 and 2 pipelines, with NATO believing the gas leaks were the result of sabotage but declining from saying who they thought was responsible. While neither pipeline was supplying gas to Europe when the leaks were first detected (Russia had cut off deliveries earlier this year), both had gas in them to maintain pipeline pressure. As of Thursday, four leaks have been reported, posing risks to environmental damage. From a political standpoint, the fact that it’s no longer possible to use either of the Nordstream pipelines in the short- to medium-term, reduces the opportunities for a diplomatic solution for the war to end. In other words, one very important off ramp for Putin is no longer in service.
In Canada, the September month-to-date AECO 5a spot rate is C$3.98/GJ, while the month-to-date Dawn Next Day weighted average index rate is currently C$8.90/GJ. Prompt-month futures for AECO are trading at C$4.67/GJ, while Dawn is trading at C$7.32/GJ. Prices have fallen at Dawn, with a week-over-week decrease of $1.32/GJ, whereas prices increased by $0.23/GJ at AECO. Point Logic reports Canadian natural gas storage for the week ending September 23rd was sitting at 600 Bcf, after an overall injection of 19 Bcf. Eastern Canadian storage had an injection of 14 Bcf, and Western Canadian storage had an injection of 5 Bcf. Storage levels are now 10% below the 5-year average and 6% below storage levels last year at this time. Canadian storage is 69% full, with Eastern storage levels now at 91% of capacity and Western storage 60% full. An injection of 16 Bcf is expected for the week ending tomorrow.
– Karyn Morrison, Energy Advisor
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