Prompt month has rolled over to December and Henry Hub natural gas futures are trading at US$3.32MMBtu as of 1:15pm EDT Thursday afternoon. Prices have continued to rally higher this week with the driving factors being shifting weather patterns as colder temperatures increase demand and liquified natural gas (LNG) exports increase. The EIA estimated working gas storage was 3,955 Bcf for the week ending October 23rd, 2020, following an injection of 29 Bcf. This bullish report is lower than market expectations of 37-41 Bcf, helping to push prices back up today from this morning’s low of US$3.15MMBtu. Storage levels are now 7.8% above year-ago levels and, relative to the 5-year average, 7.9% greater.
The intraday prompt month price volatility experienced today, characterized by 10-20 cent swings, has been prevalent for most of October. Of course, these price movements reverberate north of the border, affecting fixed price offers at Dawn in Ontario and AECO in Alberta. The upward-price-driving factors are long term weather outlooks (which look cold on the front-end of winter) and global LNG demand (which is growing day by day), and the downward-driving factors are shorter-term milder weather outlooks and the impending threat of more COVID-19-induced demand destruction. All these forces ultimately influence perspectives on the 2021 supply outlook. Moreover, for us Canadians, the drop in the price of crude puts downward pressure on the Canadian dollar which has an inverse effect on commodities benchmarked in U.S. dollars – we see prices increase.
In Canada, prompt-month futures are trading at the same levels as current daily index prices: AECO is trading at C$3.17/GJ, while Dawn is trading at C$3.56/GJ. Again, Canadian futures prices are seeing the same type of intraday volatility as Henry Hub. Canadian natural gas storage for the week ending October 23rd, 2020, was sitting at 792.8 Bcf, after an overall injection of 2.1 Bcf, up 0.26% from last week and up 28% from last year at this time. This could be the final injection of the season.
– Karyn Morrison, Energy Data Analyst / Grace Wilton, Energy Data Analyst
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