Henry Hub natural gas futures continue to hold near US$2.50/MMBtu, dropping over 40% since the start of 2023. The United States has seen the mildest January since 2006, significantly reducing heating demand. Robust US natural gas production and improved storage inventories has driven down domestic natural gas prices. Going forward, key supply/demand factors affecting natural gas prices will be extreme weather conditions – hot or cold, growth in renewables, and the restart of the Freeport LNG export plant in Texas.
The EIA estimated working gas storage was 2,366 Bcf for the week ending February 3rd, following an overall withdrawal of 217 Bcf. The pull was above market expectations averaging 201 Bcf, as heating demand increased with the cold snap over the past week, and freeze-offs temporarily reduced natural gas production. Storage levels are in a 10.9% year-over-year surplus and are now 5.2% greater than the 5-year average.
In Canada, the February month-to-date AECO 5a spot rate is C$2.66/GJ, while the month-to-date Dawn Next Day weighted average index rate is currently C$3.28/GJ. Spot market prices are now lower than this time last year, before Russia’s invasion of Ukraine impacted global energy markets, as unusually mild winter temperatures have weakened natural gas prices. Prompt-month futures for AECO are trading at C$2.67/GJ, while Dawn is trading at C$3.27/GJ. Prices have fallen, with week-over-week decreases of $0.07/GJ and $0.06/GJ at AECO and Dawn, respectively. Point Logic reports Canadian natural gas storage for the week ending February 3rd was sitting at 437 Bcf, after an overall withdrawal of 26 Bcf. Eastern Canadian storage had a pull of 14 Bcf, while Western Canadian storage had a withdrawal of 12 Bcf. Storage levels are now 16% above prior-year storage levels but remain 3% less than the five-year average. Canadian storage is 50% full, with Eastern storage levels now at 58% of capacity and Western storage at 48%. A net withdrawal of 13 Bcf is expected for the week ending tomorrow.
– Karyn Morrison, Energy Advisor
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