Henry Hub natural gas futures for November are trading at US$5.68/MMBtu as of 2:45pm EDT Thursday afternoon, up over 9 cents from yesterday’s close of $5.59/MMBtu, after a bullish storage report. Dry gas production is currently estimated at 91.5 bcf/d after hitting above 93.5 bcf/d for a 3-day stretch. Pipeline maintenance has kicked in; however, it should be back above 93 bcf/d by the 18th, barring any additional maintenance-related events. The EIA estimated working gas storage was 3,369 Bcf for the week ending October 8th, following an overall injection of 81 Bcf. The injection was lower than market expectations ranging from 85-104 Bcf, as lower wind generation elevated power burn demand. Storage levels are now 12.9% below year-ago levels and, relative to the five-year average, 4.9% less. It is worth noting that current year-to-date inventory levels are within the normal range and 12.6% higher than the 5-year minimum level of 2,991 Bcf in 2018. The EIA estimates inventories will end the 2021 injection season (end of October) 5% below the five-year average. Injections this summer have been lower than average, primarily as a result of increased demand for natural gas used for power generation, high natural gas exports and relatively flat dry natural gas production. With a tight supply/demand imbalance heading into the uncertainty of winter, the risk of volatility remains.
As published in their October Short-Term Energy Outlook report, the EIA raised its projection and expects Henry Hub spot prices will average US$5.80/MMBtu during the fourth quarter in 2021, which is US$1.80/MMBtu higher than forecasted in September. In the latest forecast, Henry Hub spot prices will reach a monthly average peak this winter of US$5.90/MMBtu in January 2022, averaging US$5.67/MMBtu between October and March 2022 – the highest winter price since 2007-2008. The EIA forecasts prices to decline through 2022, averaging US$4.01/MMBtu for the year, as US natural gas production increases and LNG export growth slows.
In Canada, prompt-month futures for AECO are trading at C$4.90/GJ, while Dawn is trading at C$6.29/GJ. Prices have declined from last week’s highs, with week-over-week decreases of $0.45/GJ and $0.28/GJ at AECO and Dawn, respectively. Point Logic reports Canadian natural gas storage for the week ending October 8th was sitting at 660 Bcf, after an overall injection of 11 Bcf. This injection increases storage inventories to 7.1% below the 5-year average and 15.2% below storage levels last year at this time. Eastern storage levels are now at 94% capacity and Western storage is 69% full. Injections for the week ending tomorrow are expected to come in at 9 Bcf.
– Karyn Morrison, Energy Advisor / Grace Wilton, Senior Energy Advisor
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