Prompt month has rolled over to May and Henry Hub natural gas futures are trading at US$5.75/MMBtu as of 1:45pm EDT Thursday afternoon, up over 14 cents from yesterday’s close of US$5.605/MMBtu. Despite US liquified natural gas (LNG) exports being capped by existing LNG capacity, North American markets continue to rally from geopolitical influences of the Russian invasion of Ukraine, rather than US natural gas fundamentals. As reported in Bloomberg News, “President Vladimir said Russia will halt gas supplies to buyers from unfriendly states unless they switch to payments in rubles from April 1. To buy Russian gas, they need to open ruble accounts in Russian banks. If such payments aren’t made, we will consider this a failure by the client to comply with its obligations.” US LNG exports remain strong, with Europe further increasing demand for US LNG. US dry gas production has remained flat, remaining near 94 Bcf/d, and is projected to increase slowly by over 3 Bcf/d in 2022.
The EIA estimated working gas storage was 1,415 Bcf for the week ending March 25th, following the first injection of the season with 26 Bcf. The injection was in line with market expectations averaging 25 Bcf, and above the five-year average withdrawal of 23 Bcf. Storage levels are now 19.7% below year-ago levels and, relative to the five-year average, 14.7% less.
In Canada, the March month-to-date AECO 5a spot rate is C$4.82/GJ, while the month-to-date Dawn Next Day weighted average index rate is currently C$5.63/GJ. March spot prices have increased 87% at AECO and 90% at Dawn compared to last March. Prompt-month futures for AECO are trading at C$5.02/GJ, while Dawn is trading at C$6.19/GJ. Prices continue to trend upward, with week-over-week increases of $0.41/GJ and $0.20/GJ at AECO and Dawn, respectively. Point Logic reports Canadian natural gas storage for the week ending March 25th was sitting at 233 Bcf, after a withdrawal of 3 Bcf. This withdrawal decreases storage inventories to 30.9% below the 5-year average and 27% below storage levels last year at this time. Canadian storage is 27% full, with Eastern storage levels now at 17% of capacity and Western storage 32% full. A withdrawal of 18 Bcf is expected for the week ending tomorrow. End of March storage inventories are forecasted to reach the lowest level since the cold winter of 2013-2014, putting upward pressure on prices.
– Karyn Morrison, Energy Advisor
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