Henry Hub natural gas futures for December rallied higher on Wednesday, to settle at US$7.31/MMBtu, up over 7% from Tuesday’s close. With the U.S. Thanksgiving holiday, the market reacted to the EIA storage report that was released early, cooler weather forecasts, and the threat of a US railroad workers’ strike, that was previously averted in September, starting as soon as December 5th. This would impact coal supplies to US power plants, directly leading to increased natural gas demand. Concerns that Russia will cut off the remainder of natural gas exports flowing to Ukraine further boosted prices. Any hint of “bullish news” is resulting in large daily price swings, and the risk of volatility remains. Winter weather and the restart of the Freeport LNG export plant in Texas will be key drivers of demand and prices in the upcoming months.
The EIA estimated working gas storage was 3,564 Bcf for the week ending November 18th, following the first withdrawal of the season at 80 Bcf. The pull was in line with market expectations, but significantly larger than the five-year average decline of 48 Bcf. Storage levels are now 1.7% below year-ago levels and, relative to the five-year average, 1.1% less. The winter season has begun and a withdrawal of 103 Bcf is expected for the week ending tomorrow.
In Canada, prompt-month futures for AECO are trading at C$6.41/GJ, while Dawn is trading at C$9.17/GJ. Colder temperatures have pushed prices higher, with week-over-week increases of $0.62/GJ and $1.59/GJ at AECO and Dawn, respectively. Point Logic reports Canadian natural gas storage for the week ending November 18th was sitting at 633 Bcf, after an overall withdrawal of 10 Bcf. Eastern Canadian storage had a withdrawal of 4 Bcf, while Western Canadian storage had a withdrawal of 6 Bcf. Storage levels are now 8% below the 5-year average and 5% below storage levels last year at this time. Canadian storage is 72% full, with Eastern storage levels now at 88% of capacity and Western storage significantly lower at 65%. A withdrawal of 13 Bcf is expected for the week ending tomorrow. Storage inventories are expected to end the winter 2023 season near the five-year average as production is forecasted to increase year-over-year.
– Karyn Morrison, Energy Advisor
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