The upward momentum continues as Henry Hub natural gas futures are trading at US$4.65/MMBtu as of 2:00pm EDT Thursday afternoon. Hurricane Ida negatively impacted production in the Gulf of Mexico, and today’s disappointing storage report continued to raise storage inventory level concerns, as winter demand nears. US dry gas production is down below 90 Bcf/day, estimated at 88.6 Bcf/day, and US LNG export demand remains strong, which pushed prices to a high of US$4.727/MMBtu earlier today. The EIA estimated working gas storage was 2,871 Bcf for the week ended August 27th, following an injection of 20 Bcf after a week where total US demand averaged 82.6 Bcf/day – 2.2 Bcf/day higher than the week prior, primarily due to increased power burn demand. This bullish report came in lower than market expectations, which ranged from 22-29 Bcf. Storage levels are now 16.8% below year-ago levels and, relative to the five-year average, 7.2% less.
In Canada, prompt-month futures for AECO are trading at C$3.52/GJ, while Dawn is trading at C$5.28/GJ. Prices at Dawn have continued their upward trend, with a week-over-week increases of $0.47/GJ, while AECO prices have decreased by $0.35/GJ. AECO price weakness persisted in August and into September due to maintenance on the NOVA Gas Transmission Ltd. (NGTL) system (impacting flows at the East Gate), which impacted interruptible transport capacity. Canadian natural gas production remains strong; however, Canadian storage remains 11% below the five-year average according to data by S&P Global Platts Analytics. A tight supply/demand balance is forecasted for Western Canada as strong exports to the US are expected, and demand growth continues with coal power plants converting to gas.
– Karyn Morrison, Energy Advisor