Henry Hub natural gas futures for November were trading at US$2.316/MMBtu last week. Prices gradually rose, starting at a low of US$2.187/MMBtu on October 11th and reaching a high of US$2.384/MMBtu, before beginning its descent to today’s average traded price of US$2.32/MMBtu. The EIA estimated working gas storage was 3,519 Bcf for the week ended October 11th, 2019 – an increase of 104 Bcf. Even though storage injections came in slightly lower than market expectations of 108 Bcf, resulting in a mini rally of prices this morning, the reported build exceeded both last year’s injection of 82 Bcf and the 5-year average injection of 81 Bcf. Storage levels are now 16.3% above year-ago levels and have finally increased above the 5-year average by 0.4%. Despite an apparent supply cushion heading into the winter, weather is always a wild card to be mindful of.
In Canada, November prompt-month futures for AECO are trading at C$2.17/GJ, while Dawn is trading at C$2.65/GJ. AECO increased by C$0.14/GJ, while Dawn decreased by the same margin. Canadian natural gas storage for the week ended October 11th, 2019 is sitting at 591.3 Bcf, after an injection of 13.8 Bcf. Relative to last year, inventories are 7.3% lower. It should be noted that Eastern Canada inventories are 13.2 Bcf (5%) more than this time last year, with Dawn (Union Gas) storage pushing capacity.
Western Canadian storage levels are down 15% from last year and sitting at 321 Bcf. These pre-heating-season storage levels are at a 13-year low and the region is poised to be below historical levels as it enters summer 2020. Month-to-date spot prices at AECO have averaged C$1.73/GJ, having started the month off quite low at C$0.90/GJ. However, now that TC Energy has finally improved producer access to storage this month, we are seeing healthier pricing, with the AECO spot price averaging C$2.32/GJ since Tuesday. The reduced capacity of BC’s T-South pipeline has also caused more natural gas to flow through Alberta; however, storage access has been key. This is evidenced by the week-over-week jump in Western storage: 8.2 Bcf into storage last week versus 0.2 Bcf the week prior.
– Connor Thornhill, Energy Services Analyst