Henry Hub natural gas futures for January are trading at US$3.83/MMBtu as of 1:30pm EDT Thursday afternoon. Prompt-month futures fell to a four-month low to close at US$3.657/MMBtu on Monday, December 6th, on forecasts of warmer winter weather to start the heating season. That said, prices have rebounded on hints of lower temperatures to close out December. Increased natural gas production and weather patterns have been the key drivers impacting price movement over the last two weeks. US dry gas production is estimated at 95.6 Bcf/d and global demand for US liquefied natural gas (LNG) remains strong, limiting some downward pressure on prices. The EIA estimates that US LNG exports averaged 10.7 Bcf/d in November 2021, up 0.8 Bcf/d from October due to elevated spot prices in Europe and Asia. Despite the price decline this week, futures are still up 59% or US$1.416/MMBtu from a year earlier. The risk of volatility for the winter remains, as cooler temperatures can quickly put upward pressure on prices.
The EIA estimated working gas storage was 3,505 Bcf for the week ending December 3rd, following an overall withdrawal of 59 Bcf. The withdrawal was in line with market expectations averaging 53 Bcf and had minimal impact on pricing today. Storage levels are now 9.2% below year-ago levels and, relative to the five-year average, 2.5% less. The EIA expects natural gas inventories to fall during the November to March withdrawal season, ending 2% less in March 2022 compared to the 2017–21 average for this period.
In Canada, prompt-month futures for AECO are trading at C$3.76/GJ, while Dawn is trading at C$4.51/GJ. Prices at Dawn have declined, with a week-over-week decrease of $0.61/GJ, while prices at AECO have increased week-over-week by $0.20/GJ. Point Logic reports Canadian natural gas storage for the week ending December 3rd was sitting at 654 Bcf, after a withdrawal of 15 Bcf. This withdrawal decreases storage inventories to 4.9% below the 5-year average and 14.7% below storage levels last year at this time. Canadian storage is 75% full, with Eastern storage levels now at 92% of capacity and Western storage 69% full. A withdrawal of 16 Bcf is expected for the week ending tomorrow.
– Karyn Morrison, Energy Advisor
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