Natural gas futures have rallied consistently over the last three weeks to reach 7-week highs and it’s looking as though resistance is finally being established at the US$3/MMbtu level for natural gas delivered at Henry Hub during the summer months, with support levels at the US$2.60/MMbtu mark. Similarly, January 2022 futures at Henry Hub have been moving within about a 30-cent range between US$3/MMbtu and US$3.30/MMBtu. Technically, we are expecting prices to soften some more next week.
Prompt month has rolled over, and Henry Hub June natural gas futures are trading at US$2.89/MMBtu as of 1:00pm Thursday afternoon. The May contract closed on Wednesday at US$2.925/MMBtu, up $0.233/MMBtu from a week earlier and up $1.131/MMBtu from last year, as liquefied natural gas (LNG) exports remain strong. Increased foreign demand for US LNG exports is expected to increase throughout the spring and summer as the supply/demand imbalance in Europe remains tight. According to Goldman Sachs Group Inc., global LNG supplies are expected to rise by 43 million metric tons per year (mmty), with the US in the lead. US LNG exports could grow by 35 mmty from 2020 levels. Even with the growth, the US is still predicted to fall behind Qatar and Australia in terms of overall production. Goldman expects US exports to average 70 mmty this summer, while Qatar and Australia are expected to produce around 79 mmty. The EIA released its Monthly Energy Review, in which it reports US gross imports of natural gas declined in 2020, while exports have continued to increase every year since 2014. Gross exports of natural gas reached a record high of 14.4 Bcf/day in 2020, while gross imports of natural gas fell to 7.0 Bcf/day, the lowest level since 1993.
The EIA estimated working gas storage was 1,898 Bcf for the week ending April 23rd, following an injection of 15 Bcf. Storage levels are now 13.7% below year-ago levels and, relative to the 5-year average, 2.1% less. This report came in slightly higher than market expectations ranging from 7-13 Bcf, with prices sliding 6 cents from this morning’s open of US$2.95/MMBtu. Last year at this time, the EIA reported an injection of 70 Bcf, and the 5-year average injection is 67 Bcf.
In Canada, prompt-month futures for AECO are trading at C$2.83/GJ, while Dawn is trading at C$3.24/GJ. Prices have continued their upward trend, with week-over-week increases of $0.16/GJ and $0.17/GJ at AECO and Dawn, respectively. Canadian natural gas storage for the week ending April 23rd, 2021 was sitting at 358 Bcf, after an overall injection of 1 Bcf. This injection increases storage inventories to 30 Bcf below the 5-year average and 17 Bcf above storage levels last year at this time.
– Karyn Morrison, Energy Advisor / Grace Wilton, Senior Energy Advisor