The rally continues this week, as Henry Hub natural gas futures for September are trading at US$4.16/MMBtu as of 1:00pm EDT Thursday afternoon. Expectations for hot weather have increased power burn demand and strong liquefied natural gas (LNG) exports persist. Front-month natural gas futures are continuing to trade above US$4.00/MMBtu for the fall and through to March 2022, reaching highs not seen since December 2018. The Energy Information Administration (EIA) reported US exports of liquefied natural gas (LNG) reached record highs, increasing 42% or 2.8 Bcf/d during the first six months of 2021 compared with the same period in 2020. This growth can be attributed to increases in natural gas and LNG spot prices in Asia and Europe due to weather-induced heating demand and, most recently, the ongoing heated controversy surrounding the Nord Stream 2 natural gas pipeline which is 98% complete (read more). Unplanned outages at LNG export facilities in several countries also contributed to increased US LNG exports, along with new export capacity added in 2020.
For the week ending July 30th, the EIA estimated working gas storage increased by 13 Bcf compared to the medium injection of 21 Bcf the market was anticipating. The 13 Bcf injection is 64% lower than last week’s 36 Bcf injection. Storage totaled 2,727 Bcf, reflecting a further tightening of the natural gas supply/demand balance, as storage levels are now 16.6% below year-ago levels and, relative to the five-year average, 6.4% less. This helped to boost prices higher from this morning’s low of US$4.116/MMBtu. The average injection into storage this season, 54 Bcf, is 28% lower than last injection season’s year-to date average of 71 Bcf. We are looking at end-of-injection-season predictions for storage levels to reach around 3,550 Bcf, and an end-of-21/22 withdrawal-season storage level of about 1,450 Bcf – this is a year-over-year difference of -9.5% and -21.4%, respectively.
In Canada, prompt-month futures for AECO are trading at C$3.42/GJ, while Dawn is trading at C$4.67/GJ. Prices at Dawn have continued their upward trend, with a week-over-week increase of $0.21/GJ, while AECO had a week-over-week decrease $0.13/GJ. Canadian natural gas storage for the week ending July 30th was sitting at 483 Bcf, after an overall injection of 13 Bcf. This injection increases storage inventories to 15.7% below the 5-year average and 22% below storage levels last year at this time. Eastern storage levels are now at 65% capacity and Western storage is 52% full.
– Karyn Morrison, Energy Advisor / Grace Wilton, Senior Energy Advisor
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