Warmer weather forecasts have put some downward pressure on prices, with Henry Hub prompt-month futures trading within five cents of their En-Pro forecasted value at US$3.95/MMBtu as of 1:45pm EDT Thursday afternoon. Natural gas futures are down 28% from last Wednesday’s close of US$5.501/MMBtu, but continue to be impacted by the tight supply/demand balance. US dry gas production has recovered to above 94 Bcf/d, after freeze-offs impacted 5 Bcf/d last weekend, and US liquified natural gas (LNG) exports remain robust. As published in their February Short-Term Energy Outlook, the EIA estimates US LNG exports averaged 11.2 Bcf/d in January, up from 10.4 Bcf/d in the fourth quarter of 2021, supported by high natural gas prices in Europe and Asia. In fact, January deliveries to Europe reached a record 67% of total US LNG export volume, as warmer weather kept Asian storage levels full. In part due to the shorter shipping distance to Europe (vs. Asia), US LNG exports are forecasted to increase 16% from 2021, averaging 11.3 Bcf/d in 2022. The risk of volatility for February and March remains as ongoing changes to weather forecasts will be a key driver of prices.
The EIA estimated working gas storage was 2,101 Bcf for the week ending February 4th, following an overall withdrawal of 222 Bcf. The withdrawal was in line with market expectations averaging 223 Bcf, making this the fourth consecutive week of pulls over 200 Bcf. Storage levels are now 17.3% below year-ago levels and, relative to the five-year average, 9.3% less. With the cooler than normal temperatures in January, the EIA expects natural gas inventories to end the withdrawal season 8% less compared to the 2017-21 average for this period.
In Canada, prompt-month futures for AECO are trading at C$3.77/GJ, while Dawn is trading at C$4.82/GJ. Prices have fallen, with week-over-week decreases of $1.16/GJ and $2.10/GJ at AECO and Dawn, respectively. We are expecting month-of-February AECO 5a and Dawn Next Day index prices to settle to an average of around C$4.55/GJ and C$5.25/GJ, respectively. Point Logic reports Canadian natural gas storage for the week ending February 4th was sitting at 410 Bcf, after a withdrawal of 22 Bcf. This withdrawal decreases storage inventories to 14.8% below the 5-year average and 19.3% below storage levels last year at this time. Canadian storage is 47% full, with Eastern storage levels now at 49% of capacity and Western storage 47% full. A withdrawal of 13 Bcf is expected for the week ending tomorrow.
– Karyn Morrison, Energy Advisor / Grace Wilton, Senior Energy Advisor
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