Natural gas volatility persists, as the cold arctic weather continued to impact the North American natural gas market this week. Henry Hub natural gas futures for March are trading at US$3.08/MMBtu as of 1:15pm EDT Thursday afternoon. Futures for March settled at US$3.219/MMBtu yesterday, with prompt-month prices reaching highs not seen since November 2020, up $0.308 from a week earlier and up $1.238 from last year. Weather patterns, increased demand, and supply challenges are the key factors influencing pricing. Markets will be closely watching how quickly natural gas production recovers from well freeze-offs, along with declining liquified natural gas (LNG) exports. As a result of the extreme winter weather overwhelming Texas, the Governor of Texas issued an order on February 17th that natural gas produced in the state remain in the state until February 21st, 2021, to ensure power generators have enough natural gas to operate. The EIA estimated working gas storage was 2,281 Bcf for the week ending February 12th, 2021, following a withdrawal of 237 Bcf. This bearish report came in lower than market expectations of 241-252 Bcf, putting downward pressure on prices this afternoon. Storage levels are now 4.4% below year-ago levels and, relative to the 5-year average, 2.6% greater.

In Canada, elevated spot market prices at AECO and Dawn are starting to subside after Dawn spiked to a high of $10.62/GJ earlier this week. The February spot market rate at AECO has averaged $4.34/GJ month-to-date, while the Dawn spot price has averaged $5.40/GJ. Prompt-month futures for AECO are trading at C$3.27/GJ, while Dawn is trading at C$4.05/GJ. Prices are continuing to track upward, with week-over-week increases of $0.23/GJ and $0.57/GJ at AECO and Dawn, respectively. Canadian natural gas storage for the week ending February 12th, 2021 was sitting at 472 Bcf, after an overall withdrawal of 54 Bcf. Storage inventories are 61 Bcf higher than last year at this time and 2 Bcf above the five-year average. Canadian natural gas producers are sending large volumes of natural gas south of the border due to weather-induced demand, natural gas production decreases and gas shortages impacting power supply in Texas, Louisiana, and Oklahoma.

– Karyn Morrison, Energy Advisor

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