In Canada, natural gas prices in the spot market are taking center stage this week, with the onset of frigid temperatures across the country. The February spot rate at AECO has averaged C$3.71/GJ month-to-date, up 42.7% from January’s settle, with the daily price on February 10th spiking to $5.33/GJ. Dawn has averaged C$3.72/GJ month-to-date, up 22.7% from January. Today the next-day Dawn index prices spiked to average around C$5.79/GJ! Extreme cold weather advisories have been issued for most of the North American natural gas market, so we can expect these elevated prices to continue to February 17th when temperatures subside somewhat. Prompt-month futures for AECO are trading at C$3.04/GJ, while Dawn is trading at C$3.48/GJ. Prices are continuing to track upwards, with week-over-week increases of $0.15/GJ and $0.07/GJ at AECO and Dawn, respectively. In other parts of the country, Saskatchewan set a record for daily natural gas consumption due to the extreme cold temperatures this week.

Henry Hub natural gas futures for March are trading at US$2.86/MMBtu as of 1:00pm EDT Thursday afternoon, after reaching a high of $3.045/MMBtu earlier today. The volatility continues, as weather-related gas demand is a key factor with longer-range forecast models suggesting below-average temperatures in March. Supply levels have dropped, and Henry Hub spot market prices have continued to increase. In the February Short-Term Energy Outlook report, the U.S. Energy Information Administration (EIA) expects Henry Hub spot prices will average $2.95/MMBtu in 2021, up from the 2020 average of $2.03/MMBtu. The EIA expects continued growth in liquified natural gas (LNG) exports and a shrinking surplus of natural gas in storage compared with the five-year average. The EIA estimated working gas storage was 2,518 Bcf for the week ending February 5th, 2021, following a withdrawal of 171 Bcf. This report came in lower than market expectations of 179-181 Bcf, putting downward pressure on prices today. Storage levels are now 0.4% below year-ago levels and, relative to the 5-year average, 6.4% greater.

In natural gas news this week, natural gas producers, ARC Resources and Seven Generations, have merged to become the Montney’s largest pure-play natural gas producer. The new entity will operate under the name ARC Resources Ltd. and will continue to produce about 1.2 Bcf per day of natural gas and 138,000 barrels per day of liquids, at roughly $110 million less cost than when the two partners were separate. In other news, Brookfield Infrastructure Partners LP announced today that it would like to purchase Inter Pipeline Ltd. at C$13.5 billion, but Inter Pipeline has stated that price is not high enough. Inter Pipeline is currently building the Heartland Petrochemical Complex in Strathcona County, Alberta (just east of Edmonton), an integrated propane dehydrogenation and polypropylene facility – the first of its kind in Canada.

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

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