Natural gas futures continue to soar, pushing above US$7/MMBtu and reaching highs not seen since 2008. Henry Hub spot market prices have also climbed, with daily prices closing as high as US$6.57/MMBtu, close to the US$6.70/MMBtu daily high of last Fall. The 30-day average spot price is also within pennies, but not yet above, the Fall 2021 30-day average high of US$5.53/MMBtu. Colder-than-normal temperatures, relatively flat production, storage deficits well below historical averages, and rising US liquefied natural gas (LNG) exports (fueling global supply concerns alongside the ongoing Russian invasion of Ukraine) are driving market volatility. Henry Hub prompt-month futures are trading at US$7.21/MMBtu as of 1:00pm EDT Thursday afternoon, up 93 cents from last Friday’s close of US$6.278/MMBtu. Rationale for a trend reversal and pullback in prices will gain leverage when daily production maintains levels above 96 Bcf/d, which is expected to transpire in May or June. For now, the market has its blinders on when it comes to signals of imminently increasing production. The increased rig activity, which began in earnest in Jan 2022, will take 4-6 months before the fruits of its labour shows up in real-time, higher production numbers. As reported in the EIA April Short-Term Energy Outlook (STEO), it is forecasted the Henry Hub spot market prices will average US$5.23/MMBtu in 2022, a significant forecast revision, up 32% from March’s STEO forecast of US$3.95/MMBtu. En-Pro’s forecast has Henry Hub spot prices averaging within a range of US$4.70 and US$5.15/MMBtu. The EIA’s Henry Hub spot market price forecast for 2023 is a decrease to US$4.01/MMBtu, as storage levels increase in 2023. En-Pro’s presently forecasting 2023 Henry Hub prices between US$3.45 and US$4.25/MMBtu and leaning towards the upper half of that range.
The EIA estimated working gas storage was 1,397 Bcf for the week ending April 8th, following an overall injection of 15 Bcf. The build was in line with market expectations, and bullish compared with the five-year average injection of 33 Bcf, pushing prices higher. Storage levels are now 23.9% below year-ago levels and, relative to the five-year average, 17.8% less. The EIA forecasts inventories will end the injection season (end of October) 4% less than the five-year average, implying year-over-year injections will be 7% higher.
In Canada, prompt-month futures for AECO are trading at C$6.42/GJ, while Dawn is trading at C$8.14/GJ. Prices have risen, with week-over-week increases of $0.92/GJ and $1.24/GJ at AECO and Dawn, respectively. Point Logic reports Canadian natural gas storage for the week ending April 8th, was sitting at 220 Bcf, after an overall withdrawal of 1 Bcf. Eastern Canadian storage had an injection of 1 Bcf, while Western Canadian storage had a withdrawal of 2 Bcf. This withdrawal decreases storage inventories to 33.5% below the 5-year average and 28.6% below storage levels last year at this time. Canadian storage is 25% full, with Eastern storage levels now at 19% of capacity and Western storage 29% full. An injection of 2 Bcf is expected for the week ending tomorrow.
– Karyn Morrison, Energy Advisor
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