The price rollercoaster for natural gas continues, as Henry Hub natural gas futures for May spiked to over US$8.00/MMBtu on Monday. Prices sharply retreated mid-week, closing at US$6.937/MMBtu on Wednesday, April 20th. Prompt-month futures have tumbled another 10 cents, trading at US$6.83/MMBtu as of noon EDT Thursday. The pullback and start of the price correction was expected alongside forecasts for increased US dry gas production in the upcoming months, a sign of loosening supply/demand fundamentals. The risk of volatility remains, however, with strong liquefied natural gas (LNG) exports to Europe amid the ongoing Russian-Ukraine conflict. As reported in the EIA April Short-Term Energy Outlook (STEO), the EIA expects US LNG exports to average 12.2 Bcf/d in 2022, which is 0.9 Bcf/d above last month’s forecast, and a 25% increase from 2021. Once the new Calcasieu Pass LNG export facility is placed in service at the end of 2022, the EIA reports the US will have more LNG export capacity than any other country. High LNG demand in Europe and Asia will continue to support US LNG exports.
The EIA estimated working gas storage was 1,450 Bcf for the week ending April 15th, following an overall injection of 53 Bcf. The build was higher than market expectations averaging 37 Bcf, and the five-year average injection of 42 Bcf, helping to put downward pressure on prices. Storage levels are now 22.8% below year-ago levels and, relative to the five-year average, 16.8% less. The US ended the withdrawal season with the least natural gas in storage since 2019. Despite increased natural gas production, record-high LNG exports and strong heating demand resulted in above-average withdrawals.
In Canada, the April month-to-date AECO 5a spot rate is C$6.60/GJ, while the month-to-date Dawn Next Day weighted average index rate is currently C$7.47/GJ. April spot prices have increased 37% at AECO and 32% at Dawn, compared to March, as storage levels remain significantly below the five-year average. Prompt-month futures for AECO are trading at C$5.20/GJ, while Dawn is trading at C$8.03/GJ. Prices have fallen, with week-over-week decreases of $1.22/GJ and $0.11/GJ at AECO and Dawn, respectively. Point Logic reports Canadian natural gas storage for the week ending April 15th was sitting at 218 Bcf, after an overall injection of 5 Bcf. Eastern Canadian storage had an injection of 9 Bcf, while Western Canadian storage had a withdrawal of 4 Bcf. Storage inventories are 35.3% below the 5-year average and 30.8% below storage levels last year at this time. Canadian storage is 25% full, with Eastern storage levels now at 20% of capacity and Western storage 28% full. An injection of 4 Bcf is expected for the week ending tomorrow.
– Karyn Morrison, Energy Advisor
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