Looking at futures across the North American board, prices are up predominantly due to colder temperatures this week and this morning’s storage report that come in shy of expectations. It’s amazing how the trickle-down effect works on futures pricing even though the weather really only affects short-term pricing! The EIA released its updated Short-Term Energy Outlook, in which it estimates storage levels at the end of injection season will reach the 5-year average just above 3,700 Bcf. Despite decent year-over-year expected growth in 2021 consumption within the Industrial and Residential/Commercial sectors, as the US emerges from lockdowns, the EIA reports US consumption of natural gas will actually decline by 0.4% from 2020 levels, mainly due to decreased demand from electric power generators because of higher year-over-year natural gas prices and more renewables coming online. The trend is projected to continue through to 2022.
Henry Hub natural gas futures for May are trading at US$2.75/MMBtu as of 1:00pm EDT Thursday afternoon. Pricing volatility persisted this week as prompt-month futures pulled back to close at US$2.692/MMBtu yesterday, after reaching a closing high of US$2.749/MMBtu on Monday, April 19 th. After the recent cold snap, warmer weather forecasts have been extended for late April and early May, which could produce larger storage injections in the upcoming weeks. For the week ending April 16th, dry gas production averaged 90.9 Bcf/d, down 900 MMcf/d from the previous week, while total US demand rose 3.4 Bcf/d week-on-week, averaging 78.9 Bcf/d. The EIA estimated working gas storage was 1,883 Bcf for the week ending April 16th, following an injection of 38 Bcf. Storage levels are now 11.8% below year-ago levels and, relative to the 5-year average, 0.6% greater. This bullish report came in lower than market projections ranging from 47-56 Bcf, suggesting a further tightening of the supply/demand imbalance which helped to boost prices higher today. For this week, ending tomorrow, the market expects a 12 Bcf injection, as cooler temperatures increased demand.
In Canada, prompt-month futures for AECO are trading at C$2.67/GJ, while Dawn is trading at C$3.08/GJ. Prices are continuing to track upward, with week-over-week increases of $0.08/GJ at both AECO and Dawn. Canadian natural gas storage for the week ending April 16th, 2021 was sitting at 356 Bcf, after an overall injection of 12 Bcf. This injection increases storage inventories to 27 Bcf below the 5-year average and 23 Bcf above storage levels last year at this time.
– Karyn Morrison, Energy Advisor / Grace Wilton, Senior Energy Advisor