What a difference a week makes. Last Friday, Henry Hub natural gas futures for March closed at US$2.56/MMBtu after declining by 4.35% that day; they are now trading at US$2.96/MMBtu as of 3:30pm EDT Thursday afternoon! Price volatility continued this week, with prompt-month reaching a high of US$3.005/MMBtu on Tuesday, February 2nd, a new high for 2021, before dropping to yesterday’s close of US$2.789/MMBtu. Prices are up $0.29/MMBtu from a week earlier and up $0.92/MMBtu from last year, alongside a rise in total U.S. demand, driven primarily by increased residential and commercial demand and below-average temperatures. The markets are closely watching the weather patterns for the upcoming weeks, with colder temperatures on the horizon. The EIA estimated working gas storage was 2,689 Bcf for the week ending January 29th, 2021, following a withdrawal of 192 Bcf. This report is in line with market expectations of 192-193 Bcf, helping to push prices higher today. Storage levels are now 1.5% above year-ago levels and, relative to the 5-year average, 7.9% greater.
What’s interesting about the volatility in natural gas futures right now is that there is a trickle effect of the recent spikes that is farther-reaching than just the rest of the current heating season. We have also seen next winter’s prices increase by US$0.20/MMBtu. Of course, the traded volume for next winter is one-tenth that of next month, but the fact that US natural gas production is down by almost 4% YOY and exports of LNG are projected to increase in 2022 by 40% from 2020 volumes is perhaps causing some nervousness regarding future price stability.
In Canada, prompt-month futures for AECO are trading at C$2.89/GJ, while Dawn is trading at C$3.41/GJ. Prices are continuing to track upwards, with week-over-week increases of $0.11/GJ and $0.20/GJ at AECO and Dawn, respectively. The January AECO 5A index settled at an average price of C$2.60/GJ, up 6.1% from December, while the Dawn Next Day index settled at C$3.03/GJ, up 3.4% from December’s average. Canadian natural gas storage for the week ending January 29th, 2021 was sitting at 567 Bcf, after an overall withdrawal of 36 Bcf. Storage inventories are 110 Bcf higher than last year at this time and 52 Bcf above the five-year average.
– Karyn Morrison, Energy Advisor / Grace Wilton, Senior Energy Advisor
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