2023 has seen natural gas prices collapse to their lowest level since April 2021. Henry Hub prompt-month futures are trading at US$2.56/MMBtu as of 12:30pm EDT Thursday afternoon, down over 50 cents from a week earlier and falling over US$2.15/MMBtu from last year at this time. Natural gas prices have plunged over the past month, as unprecedented warm weather in January throughout most of the US has decreased heating demand and reduced the storage deficit. Strengthening US natural gas production and the ongoing delayed restart of the Freeport liquified natural gas (LNG) export plant in Texas has further contributed to depressed prices. Analysts expect partial operations at Freeport LNG to resume in mid-February or March, but it could take more than a month for the LNG export plant to reach full capacity. Winter is still not over, and the risk of volatility remains with a tight LNG market. Europe is in a better storage position for the upcoming 2023/24 winter, but will still need to restock, sustaining demand for US LNG exports. Chinese LNG demand in 2023 is a key uncertainty and upside price risk in North America if demand returns to 2021 levels, further tightening the LNG market.
The EIA estimated working gas storage was 2,583 Bcf for the week ending January 27th, following an overall withdrawal of 151 Bcf. The bullish pull was above market expectations averaging 142 Bcf but lower than the five-year historic average withdrawal of 181 Bcf. A 5 Bcf revision was also issued for the week ending January 20th, resulting in an 86 Bcf withdrawal last week, rather than 91 Bcf. Storage levels are in a 9.4% year-over-year surplus and are now 6.7% greater than the 5-year average.
In Canada, the January AECO 5a spot rate settled at C$3.54/GJ, while the January Dawn Next-Day weighted average index rate settled at C$4.13/GJ. Compared to last year, January spot prices decreased 15% at AECO and 16% at Dawn, as milder winter temperatures weakened heating demand. Point Logic reports Canadian natural gas storage for the week ending January 27th was sitting at 465 Bcf, after an overall withdrawal of 15 Bcf. Eastern Canadian storage had a pull of 10 Bcf, while Western Canadian storage had a withdrawal of 5 Bcf. Storage levels are now 11.5% above prior-year storage levels but remain 3% less than the five-year average. Canadian storage is 53% full, with Eastern storage levels now at 64% of capacity and Western storage at 50%. A net withdrawal of 15 Bcf is expected for the week ending tomorrow.
– Karyn Morrison, Energy Advisor
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