Weather forecasts are calling for varying degrees of colder temperatures for most of January. As a result, Henry Hub natural gas futures for February are trading at US$3.84/MMBtu as of 1:15pm EDT Thursday afternoon, up 5.6% from Monday’s low of US$3.638/MMBtu. Demand for US liquefied natural gas (LNG) exports remains strong, as global natural gas prices continue to soar. Gas flows from Russia to Europe have been weaker than expected, with regulatory delays in Germany of the Nord Stream 2 pipeline certification. The EIA reports the US exported 30% more natural gas in the first 10 months of 2021, compared to the same period in 2020. US LNG exports are expected to increase 17% in 2022, averaging 11.5 Bcf/d for the year.
The EIA estimated working gas storage was 3,195 Bcf for the week ending December 31st, following an overall withdrawal of 31 Bcf. This bearish withdrawal was less than market expectations, averaging 50 Bcf, thanks to warmer than normal temperatures across parts of the US and lighter demand during the holiday week. Storage levels are now 4.6% below year-ago levels and 3.1% above the five-year average. With colder winter weather this week, a withdrawal of 123 Bcf is expected for the week ending tomorrow.
In Canada, the January month-to-date AECO 5a spot rate is C$4.36/GJ. The daily price sharply increased to C$5.40/GJ on January 5th, in response to extreme cold weather in parts of Western Canada, which increased demand and caused production freeze-offs. TC Energy shut down the Keystone pipeline for several hours on Tuesday evening for unplanned maintenance, with efforts to restart challenged by the weather. Volatility is expected as the frigid temperatures are forecasted to continue into the weekend for most regions. Prompt-month futures for AECO are trading at C$4.05/GJ, while Dawn is trading at C$4.78/GJ. Point Logic reports Canadian natural gas storage for the week ending December 31st was sitting at 593 Bcf, after a withdrawal of 23 Bcf. This withdrawal decreases storage inventories to 2.3% below the 5-year average and 11.5% below storage levels last year at this time. Canadian storage is 68% full, with Eastern storage levels now at 89% of capacity and Western storage 60% full. A withdrawal of 23 Bcf is expected for the week ending tomorrow.
– Karyn Morrison, Energy Advisor