Henry Hub natural gas futures for November are trading at US$2.78/MMBtu as of 1:00pm EDT Thursday afternoon. Price volatility persists this week as prices rallied to a high of US$2.955/MMBtu on October 12th before dropping to yesterday’s low of $US$2.610/MMBtu. The dynamics are shifting daily with weather forecasts now looking neutral for this time of year and natural gas production recovering after Hurricane Delta. The EIA estimated working gas storage was 3,877 Bcf for the week ending October 9th, 2020, following an injection of 46 Bcf. This bullish report was lower than market expectations of 51-55 Bcf, helping to push prices back up today. Storage levels are now 11.1% above year-ago levels and, relative to the 5-year average, 10% greater.
In Canada, prompt-month futures for AECO are trading at C$2.72/GJ, while Dawn is trading at C$3.15/GJ. Prices for both AECO and Dawn trended higher week-over-week by C$0.13/GJ and C$0.08/GJ, respectively. Canadian natural gas storage for the week ending October 9th, 2020, was sitting at 778.1 Bcf, after an overall injection of 12.3 Bcf, up 1.61% from last week and up 29.5% from last year at this time. Week-over-week, October month-to-date indices for AECO 5a and Dawn have risen by 21% and 15%, respectively, as Western Canadian temperatures have fallen from summer-like levels to single digits this week, with freezing temperatures expected for this weekend. South of the border we are seeing a 5% increase in overall U.S. demand from last week with another 6.4% increase expected next week, which is impacting next day prices at Dawn. Until now, October had seen discounted spot prices as storage capacity was being tested across the board. What it looks like we are experiencing now is a taste of a truer value of natural gas as more two-way flows occur. We can expect this type of volatility to continue as we officially approach withdrawal season with year-over-year U.S. production levels down by about 6.5% and Canadian production down by about 4.3% from year-ago levels.
In other news, the Ontario Energy Board (OEB) has approved a temporary rate adjustment to reflect the difference between the amount paid and the final actual costs of the 2019 Federal Carbon Pricing Program deferral. This adjustment will be applied in three equal installments on October, November and December bills. Back on April 1st, 2019, the federal government’s carbon pollution pricing program mandated a carbon charge be applied to fossil fuels consumed in Ontario, inclusive of natural gas. While the program started April 1st, Enbridge Gas Inc. was only approved by the OEB to add the carbon charge of 3.91 cents/m3 to customer bills effective August 1st, 2019. From April 1st, 2019 to July 31st, 2019, Enbridge incurred carbon costs on the customers’ behalf. The rate adjustment will apply to April-July 2019 consumption volumes and varies based on business rate class as follows: Enbridge Rate 6 $0.040139/m3, Union Gas Rate 10 $0.027752/m3 and Union Gas Rate M1 $0.024710/m3.
– John Kiemele, Vice President/COO
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