After reaching a three-month high to close at US$3.109/MMBtu on Monday, May 17 th, Henry Hub natural gas futures for June have retreated and are trading at US$2.92/MMBtu as of 1:30pm EDT Thursday afternoon. Prices started to pull back on Tuesday as moderate weather forecasts are predicted for key demand areas for natural gas consumed by electric power plants to generate electricity (power burn) and production remains steady. In the EIA’s May Short-Term Energy Outlook report, it forecasts U.S. production of dry natural gas will average 91.1 Bcf/d in 2021, which is down 0.3% from 2020. Production fell in February to 86.3 Bcf/d due to the February cold snap that largely impacted Texas. The EIA expects production to increase in the fourth quarter of 2021 and average 93.1 Bcf/d in 2022 due to higher price forecasts for natural gas compared to 2020. The EIA estimated working gas storage was 2,100 Bcf for the week ending May 14th, following an injection of 71 Bcf. Storage levels are now 15.7% below year-ago levels and, relative to the five-year average, 4% less. This bearish report came in higher than market expectations which ranged from 55-67 Bcf, and helped push prices lower today. For this week, ending tomorrow, the market expects a 102 Bcf injection, as warmer temperatures decreased domestic demand.
In Canada, the May month-to-date AECO 5a spot rate is $2.92/GJ, up C$0.27/GJ from April’s weighted average 5a spot price of C$2.65/GJ, while the month-to-date Dawn Next Day weighted average index rate is currently $3.16/GJ, up $0.18/GJ from April’s weighted average of C$2.98/GJ. Prompt-month futures for AECO are trading at C$2.91/GJ, while Dawn is trading at C$3.22/GJ. Prices have continued their upward trend, with week-over-week increases of $0.03/GJ and $0.01/GJ at AECO and Dawn, respectively. Canadian natural gas storage for the week ending May 14th, 2021 was sitting at 364 Bcf, after an overall injection of 7 Bcf. This injection increases storage inventories to 53 Bcf below the 5-year average and 22 Bcf below storage levels last year at this time. Eastern storage levels are now at 33% capacity and Western storage is 48% full.
– Karyn Morrison, Energy Advisor / Grace Wilton, Senior Energy Advisor
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