Henry Hub natural gas futures for November expired yesterday at US$6.202/MMBtu, up US$3.183/MMBtu from a year earlier, and the highest November contract price since 2008. Shifting weather forecasts, low coal inventories for power generation and robust liquefied natural gas (LNG) exports continue to be driving factors behind the recent rallies. Prompt-month has rolled over to December and Henry Hub natural gas futures are trading at US$5.82/MMBtu as of 1:30 pm EDT Thursday afternoon. US dry gas production is currently estimated at 93.7 bcf/d and is projected to reach 94 bcf/d next month. The EIA estimates US production to average 94.0 Bcf/d during the winter, and average 96.4 Bcf/d in 2022. Despite US production growth, the market will continue to remain tight as LNG exports and industrial load demand are stronger year-over-year.
The EIA estimated working gas storage was 3,548 Bcf for the week ending October 22nd, following an overall injection of 87 Bcf, as cooler temperatures increased heating demand. The injection was in line with market expectations ranging from 80-95 Bcf and injections continue to exceed the five-year average build of 62 Bcf. Several above-average storage injections over the last six weeks have helped tighten the deficit. Storage levels are now 10.2% below year-ago levels and, relative to the five-year average, 3.4% less. For the week ending tomorrow, an injection of 64 Bcf is expected.
In Canada, prompt-month futures for AECO are trading at C$6.11/GJ, while Dawn is trading at C$7.10/GJ. Prices have continued their upward trend, with week-over-week increases of $1.16/GJ and $1.23/GJ at AECO and Dawn, respectively. Point Logic reports Canadian natural gas storage for the week ending October 22nd was sitting at 674 Bcf, after an overall injection of 5 Bcf. This injection increases storage inventories to 5.9% below the 5-year average and 14.4% below storage levels last year at this time. Canadian storage is 77% full, with Eastern storage levels now at 100% capacity and Western storage 69% full. No change in storage inventories is expected for the week ending October 29th. Stronger exports to the US and increased domestic demand with the extreme hot weather in Western Canada this summer has offset production growth. As reported in the IHS Markit October North American Natural Gas Short-Term Outlook report, Canadian gas production is expected to average 15.9 Bcf/d in 2021, up 0.5 Bcf/d from the 2020 level, grow by a projected 0.9 Bcf/d in 2022 and exceed 17 Bcf/d in 2023-2024.
– Karyn Morrison, Energy Advisor
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