Henry Hub natural gas futures for August are trading at US$3.68/MMBtu as of 1:30pm EDT Thursday afternoon, up about 8 cents from Wednesday’s close of $3.596/MMBtu. The Energy Information Administration (EIA) reported a bullish storage injection of 16 Bcf for the week ending July 2nd, which came in significantly lower than market expectations which ranged from 25-39 Bcf, driving prices higher today. Storage levels are now 17.6% below year-ago levels and, relative to the five-year average, 6.9% less. Increased cooling demand as a result of record-breaking heatwaves, strong liquefied natural gas (LNG) exports and production declines continue to provide support for higher natural gas futures prices. The EIA estimates US LNG exports of 9 Bcf per day in June, a record for the month. As published in their July Short-Term Energy Outlook report, the EIA raised its projection and expects Henry Hub spot prices will average $3.22/MMBtu in 2021, up from the 2020 average of $2.03/MMBtu, and then fall to average $3.00/MMBtu in 2022. The EIA also slightly revised its expectation that US dry gas production will average 94.29 Bcf/d over the next 18 months – a level not seen since January 2020. Current production levels are estimated at 92 Bcf/d.
In Canada, the AECO 5A index settled at an average price of C$3.22/GJ in June, up 10.1% from May, while the Dawn Next Day index settled at C$3.57/GJ, up 12.7% from May’s average. June’s hot temperatures increased power burn demand and widened the storage deficit. Prompt-month futures for AECO are trading at C$3.20/GJ, while Dawn is trading at C$4.02/GJ, representing week-over-week decreases of $0.03/GJ and $0.09/GJ at AECO and Dawn, respectively. Canadian natural gas storage for the week ending July 2nd was sitting at 434 Bcf, after an overall injection of 6 Bcf. This injection increases storage inventories to 86 Bcf below the 5-year average and 109 Bcf below storage levels last year at this time. Eastern storage levels are now at 54% capacity and Western storage is 49% full.
– Karyn Morrison, Energy Advisor
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