Cold weather forecasts for the second half of January are putting upward pressure on futures prices this week. Henry Hub natural gas futures for February closed at US$4.857/MMBtu on Wednesday, the highest close since November 24. As of 1:00pm EDT Thursday afternoon, prompt-month futures have pulled back, trading at US$4.39/MMBtu, with futures contracts for the remainder of 2022 all still trading above US$4.00/MMBtu. US natural gas production has declined in January due to some well freeze-offs and maintenance, and robust US liquefied natural gas (LNG) exports have continued to tighten the supply/demand balance this week. As published in their January Short-Term Energy Outlook report, the EIA expects US LNG export capacity increases will contribute to LNG exports averaging 11.5 Bcf/d in 2022 and 12.1 Bcf/d in 2023, compared with 9.8 Bcf/d in 2021 and 6.5 Bcf/d in 2020. The EIA estimates Henry Hub spot prices will average US$3.82/MMBtu in the first quarter of 2022, average US$3.79/MMBtu for 2022, and decrease to an average of US$3.63/MMBtu in 2023.
The EIA estimated working gas storage was 3,016 Bcf for the week ended January 7th, following an overall withdrawal of 179 Bcf, as cooler temperatures increased heating demand. This is the largest withdrawal this winter so far and still in line with market expectations averaging 178 Bcf. Storage levels are now 6.2% below year-ago levels and 2.4% above the five-year average. A withdrawal of 193 Bcf is expected for the week ending tomorrow. The EIA reported US inventories ended December 2021 3% higher than the five-year (2016-2020) average. Warmer-than-normal temperatures in December allowed the supply balance to improve, pushing inventories above the five-year average. The EIA forecasts inventories will end March 2022 8% higher than the 2017-2021 average for the end of March.
In Canada, prompt-month futures for AECO are trading at C$4.92/GJ, while Dawn is trading at C$6.03/GJ. Prices have risen, with week-over-week increases of $0.87/GJ and $1.26/GJ at AECO and Dawn, respectively. Point Logic reports Canadian natural gas storage for the week ended January 7th was sitting at 562 Bcf, after a withdrawal of 31 Bcf. This withdrawal decreases storage inventories to 3.6% below the 5-year average and 12.3% below storage levels last year at this time. Canadian storage is 64% full, with Eastern storage levels now at 86% of capacity and Western storage 56% full. A withdrawal of 20 Bcf is expected for the week ending tomorrow.
– Karyn Morrison, Energy Advisor