Henry Hub natural gas futures for February are trading at US$2.473/MMBtu as of 1:15pm EDT Thursday afternoon. Prices dropped to a low of $2.454 US/MMBtu on Wednesday, January 20th, before rallying higher to close at US$2.539/MMBtu. Prompt-month futures are down $0.188 from a week earlier and up $0.644 from last year. Ongoing shifts in weather patterns continue to add to the volatility, as markets wait to see if cold Artic temperatures will materialize at the end of the month as previously anticipated. With the U.S. holiday closure on Monday, January 18th, the latest EIA storage reports will not be released until Friday; however, inventories are still above the 5-year average.
The EIA’s Short Term Energy Outlook released last week estimates natural gas consumption in the United States averaged 83.1 billion cubic feet per day (Bcf/d) in 2020, down 2.5% from 2019. This trend is expected to continue, as the EIA forecasts U.S. consumption to decrease by 2.3 Bcf/d (2.8%) in 2021 and then drop by 1.7 Bcf/d (2.1%) in 2022. The decline is primarily related to forecasted higher natural gas prices (compared with coal prices) and growth in renewable energy, making natural gas less economical for power generation. The EIA expects U.S. residential and commercial natural gas consumption to increase in the first quarter of 2021, up 5.8% from 2020, as people remain at home due to the COVID-19 pandemic and forecasted cooler temperatures slightly increase heating demand.
In Canada, prompt-month futures for AECO are trading at C$2.60/GJ, while Dawn is trading at C$2.95/GJ. Prices are continuing to track downward, with week-over-week declines of $0.30/GJ and $0.27/GJ at AECO and Dawn respectively. The January spot rate at Dawn has averaged C$3.02/GJ month-to-date and AECO has averaged C$2.56/GJ. In other news, Canadian natural gas exports to the US Midwest are near an 11-year high. According to data by Platts Analytics, exports to Great Lakes have averaged 1.5 Bcf/d in December. This is up 400 MMcf/d or 36.4% from this time last year, more than double the five-year average, and the highest since 2009.
– Karyn Morrison, Energy Advisor
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