Henry Hub natural gas futures for February are trading at US$2.733/MMBtu as of 1:20pm EDT Thursday afternoon, up 6.5% from Monday’s low of US$2.566/MMBtu and an increase of 18.6% from the January contract expiry of $2.305 US/MMBtu. Strong liquified natural gas exports and cooler temperatures in the longer-range forecast helped drive prices higher this week, suggesting further tightening of the supply/demand imbalance. The EIA estimated working gas storage was 3,330 Bcf for the week ending January 1, 2021 following a withdrawal of 130 Bcf. This slightly bearish report is lower than market expectations of 133-135 Bcf, but not enough to push prices significantly lower today. Storage levels are now 4.3% above year-ago levels and, relative to the 5-year average, 6.4% greater.

In Canada, prompt-month futures for AECO are trading at C$2.64/GJ, while Dawn is trading at C$3.16/GJ. Prices for both AECO and Dawn trended higher week-over-week by C$0.17/GJ and C$0.22/GJ, respectively. The December AECO 5a index finished off to average C$2.45/GJ, down 9.6% from November, while the Dawn Next Day index settled at C$2.93/GJ, up 0.7% from November’s average. Canadian natural gas storage for the week ending January 1, 2021, have not been updated at this time.

According to the EIA report issued today, Henry Hub natural gas spot prices in 2020 were the lowest in decades, averaging US$2.05/MMBtu. Prices started 2020 in a sunken state, as a mild winter led to less natural gas demand for heating. Beginning in March, depressed natural gas demand, as a result of COVID-19, further lowered prices, with the Henry Hub spot market price averaging a low of US$1.66/MMBtu in June 2020. During the second half of 2020, prices increased on account of lower natural gas production, increased liquified natural gas (LNG) exports and a significant increase in natural gas consumed by electric power plants to generate electricity (power burn) in response to high summer temperatures.

– Karyn Morrison, Energy Advisor / Grace Wilton, Senior Energy Advisor

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