A lot can change in a week with milder temperature forecasts! Prompt month has rolled over to April and Henry Hub natural gas futures are trading at US$2.78/MMBtu as of 1:15pm EDT Thursday afternoon. The March contract closed on February 24 at US$2.854/MMBtu, down over 11% from the close of US$3.219/MMBtu on February 17. The EIA report estimates natural gas production in Texas during the cold snap declined almost 45%, dropping from 21.3 Bcf/d during the week ending February 13 to a daily low of 11.8 Bcf/d on Wednesday, February 17 primarily due to well freeze-offs. As temperatures started to rise, daily natural gas production increased, reaching an estimated 20.9 Bcf/d on February 24, only 0.3 Bcf/d lower than the average in the week ending February 13. Markets will continue to watch the short-term weather models for warmer temperatures, declining natural gas production and increasing liquified natural gas (LNG) exports. The EIA estimated working gas storage was 1,943 Bcf for the week ending February 19th, 2021, following a historic withdrawal of 338 Bcf. As a result of the recent cold snap that impacted the central US and Texas, this is the second largest withdrawal in the past five years, when the largest withdrawal of 359 was seen back in 2018 for the week ending January 5, 2018. This storage report is in line with market expectations which varied widely from 330-359 Bcf. Storage levels are now 13.3% below year-ago levels and, relative to the 5-year average, 7.7% less.
In Canada, as temperatures return to seasonal norms and daily index prices subside from price spikes experienced earlier in the month, the February spot market rate at AECO has averaged $3.94/GJ month-to-date while Dawn month-to-date spot price has averaged $5.16/GJ. Prices increased significantly from January due to high demand brought on by extremely cold temperatures as the average Canadian heating degree-days were 206 for the week ending February 19, 18% above normal levels of 174.
Prompt-month futures for AECO are trading at C$2.83/GJ, while Dawn is trading at C$3.27/GJ. Prices are continuing to track downward, with week-over-week decreases of $0.44/GJ and $0.78/GJ at AECO and Dawn, respectively. Canadian natural gas storage for the week ending February 19th, 2021 was sitting at 418 Bcf, after an overall withdrawal of 53 Bcf. This withdrawal decreases storage inventories to 30 Bcf below the five-year average while remaining 30 Bcf above storage levels last year at this time.
– Karyn Morrison, Energy Advisor
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