After briefly dipping below US$2/MMBtu yesterday, Henry Hub prompt-month futures have rebounded over 30 cents, trading at US$2.38/MMBtu as of 2:15pm EDT Thursday afternoon. US federal regulators have approved the partial restart of commercial operations at the Freeport liquified natural gas (LNG) export plant in Texas, which has been offline since an explosion in June 2022. Once ramped up fully, Freeport will be able to export ~2 Bcf/d of LNG. On Tuesday, the plant was authorized to utilize two of the three liquefaction trains, with analysts not expecting Freeport LNG to return to full operations until May. US gas production has strengthened in 2023, pushing over 100 Bcf/d, but the risk of volatility returns in the summer as high coal prices widen the spread between coal and natural gas prices, spurring strong demand for natural gas used to generate electricity. In the nearer term, natural gas demand and prices are likely to remain depressed for most of the Spring.
The EIA estimated working gas storage was 2,195 Bcf for the week ending February 17th, following an overall withdrawal of 71 Bcf. The pull was above market expectations averaging 68 Bcf but lower than the five-year average of 183 Bcf. Storage levels are now 21.9% above year-ago levels and, relative to the five-year average, 15.2% greater. A net withdrawal of 71 Bcf is expected for the week ending tomorrow.
In Canada, prompt-month futures for AECO are trading at C$2.50/GJ, while Dawn is trading at C$2.98/GJ. Prices have fallen, with week-over-week decreases of $0.17/GJ and $0.32/GJ at AECO and Dawn, respectively, as milder weather has suppressed demand and weakened prices. Point Logic reports Canadian natural gas storage for the week ending February 17th was sitting at 418 Bcf, after an overall withdrawal of 5 Bcf. Eastern Canadian storage had a pull of 1 Bcf, while Western Canadian storage had a withdrawal of 4 Bcf. The storage surplus has increased from last week, now 36% above prior-year storage levels and 8% greater than the five-year average. Canadian storage is 48% full, with Eastern storage levels now at 54% of capacity and Western storage at 46%. A net withdrawal of 8 Bcf is expected for the week ending tomorrow. With strong production and a warmer-than-expected winter, Canadian storage inventories should end the winter above the five-year average. S&P Global Commodity Insights reports that Canadian gas-directed rig counts have continued to climb, with the January 2023 rig count increasing by 18 rigs, averaging 85, compared to 67 rigs from October through December 2022.
– Karyn Morrison, Energy Advisor
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