Henry Hub natural gas futures continue to soar despite a larger-than-expected US storage injection. Prompt-month futures are up over 9% from yesterday’s close, trading at US$8.94/MMBtu as of 2:45pm EDT Thursday afternoon. US dry gas production has declined over the past few days, due to pipeline maintenance, after reaching a high of 98.3 Bcf/day on Monday. The ongoing outage at the Freeport liquefied natural gas (LNG) export plant in Texas is leaving 2 Bdf/d in the US, but supply concerns persist as we move into hurricane season. As reported in the EIA August Short-Term Energy Outlook, it is forecasted LNG exports will average 11.2 Bcf/d in 2022, up 14% from 2021, and increase to 12.7 Bcf/d in 2023. US dry gas production is forecasted to average 96.6 Bdf/d in 2022, 3% more than 2021 and increase to average 100 Bcf/d in 2023. Even with signs that the fundamentals are moving toward a looser supply/demand balance, elevated prices remain. News yesterday that Freeport LNG retraced the force majeure declared after the June 8th explosion drove prices higher, despite no change to operations resuming partial capacity in October.

The EIA estimated working gas storage was 2,501 Bcf for the week ending August 5th, following an overall injection of 44 Bcf. The build was higher than market expectations averaging 40 Bcf and slightly less than the five-year average injection of 45 Bcf. Storage levels are now 9.7% below year-ago levels and, relative to the five-year average, 11.9% less. The EIA forecasts inventories will end the injection season (end of October) 6% less than the five-year average.

In Canada, the August month-to-date AECO 5a spot rate is C$4.21/GJ, while the month-to-date Dawn Next Day weighted average index rate is currently C$9.43/GJ. Compared to July, spot prices have declined 18% at AECO, whereas prices increased 13% at Dawn. Prompt-month futures for AECO are trading at C$5.13/GJ, while Dawn is trading at C$9.69/GJ. Prices have fallen, with week-over-week decreases of $0.22/GJ and $0.01/GJ at AECO and Dawn, respectively. Point Logic reports Canadian natural gas storage for the week ending August 5th was sitting at 482 Bcf, after an overall injection of 19 Bcf. Eastern Canadian storage had an injection of 9 Bcf, and Western Canadian storage had an injection of 10 Bcf. The storage deficit is narrowing, with storage inventories 13% below the 5-year average and 7% below storage levels last year at this time. Canadian storage is 55% full, with Eastern storage levels now at 69% of capacity and Western storage 50% full. An injection of 18 Bcf is expected for the week ending tomorrow.

– Karyn Morrison, Energy Advisor

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