Daily price swings continue, with the Henry Hub natural gas futures prompt month (Jan 2023) contract trading at US$6.10/MMBtu as of 1:30pm EDT Thursday afternoon, up over 30 cents from yesterday’s close of US$5.723/MMBtu despite a lower-than-expected storage withdrawal. Natural gas is finding support on the back of temperature forecasts trending colder for the latter half of December. Natural gas futures have declined from the highs earlier this fall on news of further delays to the restart of Freeport LNG export terminal in Texas that has been offline since the explosion in June 2022. Some analysts are anticipating Freeport may not return to partial operations until the end of December or January as it works with US regulators for approval to resume production. The shutdown has forced an additional ~2.0 Bcf/d to remain in the US, helping to reduce the storage deficit to less than 2% below the five-year average. In addition, US natural gas production continues to increase, alleviating fear of insufficient supply. As reported in the EIA December Short-Term Energy Outlook report, the forecast for US natural gas production has been raised by almost 1% in 2023, compared to last month’s forecast. The risk of volatility remains significant over the winter with rising natural gas demand for heating and LNG exports. The Biden administration has indicated the US will aim to increase US liquified natural gas exports to Britain over the next year, more than doubling 2021 exports to Britain, as the UK is struggling with sky-high energy prices.

The EIA estimated working gas storage was 3,462 Bcf for the week ending December 2nd, following an overall withdrawal of 21 Bcf. The pull was on the low end of market expectations, and below the five-year average decrease of 49 Bcf. Storage levels are now 1.5% below year-ago levels and, relative to the five-year average, 1.6% less.

In Canada, prompt-month futures for AECO are trading at C$5.28/GJ, while Dawn is trading at C$7.11/GJ. Prices have fallen, with week-over-week decreases of $0.81/GJ and $1.57/GJ at AECO and Dawn, respectively. Point Logic reports Canadian natural gas storage for the week ending December 2nd was sitting at 629 Bcf, after an overall withdrawal of 12 Bcf last week. Eastern Canadian storage had a withdrawal of 2 Bcf, while Western Canadian storage had a withdrawal of 10 Bcf as cooler temperatures increased heating demand. Storage levels are now 6% below the 5-year average and 3% below year prior storage levels. Canadian storage is 72% full, with Eastern storage levels now at 90% of capacity and Western storage significantly lower at 65%. A net withdrawal of 11 Bcf is expected for the week ending tomorrow. Natural Gas Intelligence reports Canadian Natural Resources Ltd. (CNRL), Canada’s largest natural gas producer, is targeting ~5% year-over-year increase in natural gas production in 2023, with plans to export about 36% of gas production to North American markets outside of the AECO hub in Western Canada.

– Karyn Morrison, Energy Advisor

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