Natural gas futures prices continue to soar after another week of volatility. The October contract rallied to a high of US$6.28/MMBtu on Monday, September 27th, and closed at US$5.84/MMBtu on Tuesday – the highest closing price since February 2014. The upward price action continues to be influenced by record high global natural gas prices in Europe and Asia and a tight supply/demand imbalance. We are in unprecedented times in 2021, as the global natural gas market is now weighing heavily on both forward and spot market prices. The potential of a cold winter in Europe and increased power demand in Asia is resulting in strong demand for US exports of liquefied natural gas (LNG). Even with the high global prices, the US can only export 12-15% of its LNG and market analysts agree that current futures prices are disconnected from the underlying supply/demand fundamentals in North America. Prompt-month has rolled over to November and Henry Hub natural gas futures are trading at US$5.81/MMBtu as of 2:00pm EDT Thursday afternoon, up over 30 cents from this morning’s open of US$5.457MMBtu. Weather-induced uncertainty will be a key price driving factor as we head into winter.
The EIA estimated working gas storage was 3,170 Bcf for the week ending September 24th, following an overall injection of 88 Bcf, which was in line with market expectations averaging 84 Bcf. Even with a build above injections for the same week in 2020 and the five-year average of 72 Bcf, it was not enough to put downward pressure on natural gas futures. Storage levels are now 15.4% below year-ago levels and, relative to the five-year average, 6.3% less.
In Canada, the September month-to-date AECO 5a spot rate is C$3.54/GJ, while the month-to-date Dawn Next Day weighted average index rate is currently $5.67/GJ. September spot prices have increased 60% at AECO and 141% at Dawn compared to last September. Prompt-month futures for AECO are trading at C$4.39/GJ, while Dawn is trading at C$6.36/GJ. Prices continue to trend upward, with week-over-week increase of $0.38/GJ and $0.47/GJ at AECO and Dawn, respectively. Point Logic reports Canadian natural gas storage for the week ending September 24th was sitting at 622 Bcf, after an overall injection of 18 Bcf. This injection increases storage inventories to 10.4% below the 5-year average and 17.3 % below storage levels last year at this time. Eastern storage levels are now at 89% capacity, with Dawn storage now at a small surplus to 2020 year-ago inventory levels, and Western storage is 65% full. Injections for the week ending tomorrow are expected to come in at 12 Bcf.
– Karyn Morrison, Energy Advisor / Grace Wilton, Senior Energy Advisor
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