Henry Hub natural gas futures for December are trading at US$2.99/MMBtu as of 1:00pm EDT Thursday afternoon. Prices moved lower this week, falling from the close of US$3.244/MMBtu on November 2 as a result of an unseasonably mild November weather forecasts even with a tightening supply/demand imbalance and increased liquified natural gas (LNG) exports. The upcoming winter is still projected to be cold, with the potential to push prices higher. The EIA estimated working gas storage was 3,919 Bcf for the week ending October 30th, 2020, following the first withdrawal of the season with a net decrease of 36 Bcf. This bullish report is higher than market expectations of 26-28 Bcf; however, it was still not enough to push prices above this morning’s high of US$3.113/MMBtu. Storage levels are now 5.4% above year-ago levels and, relative to the 5-year average, 5.4% greater.
In Canada, the October AECO 5a index finished off to average C$2.35/GJ, up 10% from September, while the Dawn Next Day index finished off at C$2.51/GJ, up 12% from September’s average. Prompt-month futures for AECO are trading at C$2.96/GJ, while Dawn is trading at C$3.54/GJ. Prices for both AECO and Dawn trended lower week-over-week by C$0.21/GJ and C$0.02/GJ, respectively, falling in line with price movements south of the border. Canadian natural gas storage for the week ending October 30th, 2020, was sitting at 787 Bcf, after an overall withdrawal of 5.7 Bcf, down 0.73% from last week and up 21.6% from last year at this time.
As mentioned, North American futures have gone down in the last few days due to the mild weather in store for the next week or so; however, we do expect those futures to go back up. Industry analysts concur that if the projected La Niña materializes and within the next few weeks, we feel the cold winter that would characteristically follow that weather pattern, the December Henry Hub futures contract has the potential to rally around or above US$4.00/MMbtu. That said, Mother Nature is fickle and the weather, along with the potential for more COVID-19-induced demand destruction are two wild cards that could dampen the bullish outlook for natural gas.
– Karyn Morrison, Energy Data Analyst / Grace Wilton, Energy Data Analyst
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