Market volatility continues this week, with Henry Hub natural gas futures surging to a high of US$6.394/MMBtu yesterday, and with futures through February 2023 all trading above US$6/MMBtu. Henry Hub prompt-month futures are trading at US$6.28/MMBtu as of 12:45pm EDT Thursday afternoon, as supply concerns and strong demand put upward pressure on prices. Forecasts for more natural gas used for power generation and US liquefied natural gas (LNG) exports near record highs are key factors driving prices higher. Geopolitical influences with the Russian-Ukraine conflict remain, as several European countries wean themselves off Russian natural gas and call on the US to ramp up as much new LNG export capacity as possible. The risk of volatility persists with slower US dry gas production growth and robust demand further tightening the supply/demand imbalance.
The EIA estimated working gas storage was 1,382 Bcf for the week ending April 1st, following an overall withdrawal of 33 Bcf. The slightly bullish pull was above market expectations averaging 26 Bcf, and a five-year average injection of 8 Bcf. Storage levels are now 22.4% below year-ago levels and, relative to the five-year average, 17.1% less. An injection of 7 Bcf is expected for the week ending tomorrow as warmer temperatures start to decrease heating load.
In Canada, the March AECO 5a spot price averaged C$4.83/GJ, up 8% from February’s price of C$4.48/GJ. The Dawn index averaged C$5.64/GJ, up 5% from February’s average of C$5.40/GJ. Spot prices elevated as cooler weather increased heating demand and storage levels remain well below the five-year average. Prompt-month futures for AECO are trading at C$5.50/GJ, while Dawn is trading at C$6.90/GJ. Prices have risen, with week-over-week increases of $0.58/GJ and $0.56/GJ at AECO and Dawn, respectively. Point Logic reports Canadian natural gas storage for the week ending April 1st was sitting at 217 Bcf, after a withdrawal of 11 Bcf. This withdrawal decreases storage inventories to 33.8% below the 5-year average and 29.5% below storage levels last year at this time. Canadian storage is 25% full, with Eastern storage levels now at 17% of capacity and Western storage 29% full. A withdrawal of 3 Bcf is expected for the week ending tomorrow.
– Karyn Morrison, Energy Advisor
Add comment