Market volatility continues this week, as Henry Hub natural gas futures are trading at US$5.28/MMBtu as of 1:30pm EDT. After prices reached a seven-year high, closing at US$5.46/MMBtu yesterday, a bearish EIA storage report put some downward pressure on forward prices this afternoon. The EIA estimated working gas storage was 3,006 Bcf for the week ending September 10th, following an injection of 83 Bcf. The injection was higher than market expectations ranging from 66-80 Bcf, along with the five-year average injection of 79 Bcf. Storage levels are now 16.5% below year-ago levels and, relative to the five-year average, 7.1% less. Injections have been lower this summer as heatwaves increased demand for natural gas-fired power generation and strong liquefied natural gas (LNG) exports to Europe and Asia persist alongside soaring global natural gas prices. Production concerns are creating a tight supply/demand imbalance heading into the winter period and continue to drive forward prices higher. There is evidence that speculators are exacerbating the current situation as the volume tied up in short positions is outpacing long positions by 2:1!
The EIA reported US power burn demand set a record in June 2021, averaging 5.0 million megawatt hours (MWh) per day, 4% higher than the average June 2020 record, driving spot market prices higher. June 2021 was the hottest June on record, passing the previous June record set in 2016. The EIA expects US natural gas consumption to decline in 2021 and 2022 from 2020 levels, with the largest decline in the electric power sector due to elevated natural gas prices.
In Canada, prompt-month futures for AECO are trading at C$4.43/GJ, while Dawn is trading at C$6.26/GJ. Prices have continued their upward trend, with week-over-week increases of $0.56/GJ and $0.69/GJ at AECO and Dawn, respectively. Point Logic reports Canadian natural gas storage for the week ending September 10th was sitting at 585 Bcf, after an overall injection of 21 Bcf. This injection increases storage inventories to 79 Bcf below the 5-year average and 132 Bcf below storage levels last year at this time. Eastern storage levels are now at 81% capacity and Western storage is 62% full.
– Karyn Morrison, Energy Advisor / Grace Wilton, Senior Energy Advisor