Henry Hub futures for February dropped to an 18-month low of US$3.422/MMBtu on Wednesday, before climbing back up 20 cents to close at US$3.671/MMBtu. Colder weather forecasts for late January and early February have started to put upward pressure on prices, but the February contract has dropped over 60% from August 2022 highs. Unseasonably mild winter weather in North America and Europe has reduced heating demand, sending natural gas prices tumbling. The largest market uncertainty remains the restart of the Freeport liquified natural gas (LNG) export plant in Texas. Further delays are anticipated in the seven-month-long outage, with some market analysts expecting an end of February restart at the earliest, pending regulatory approval. Once Freeport returns, demand will jump as the plant can turn about 2.1 Bcf/d of gas into LNG, which is ~2% of US daily production. The ongoing geopolitical pressures from Russia will continue to increase European demand for US natural gas, with the risk of higher domestic prices in 2023.
The EIA estimated working gas storage was 2,902 Bcf for the week ending January 6th, following an injection of 11 Bcf. It is rare to see a build in January, especially following two consecutive storage withdrawals over 200 Bcf. With warmer than normal temperatures and strong US production, storage levels are now 4.6% below year-ago levels and, relative to the five-year average, 1.4% less. A pull of 74 Bcf is expected for the week ending tomorrow.
In Canada, prompt-month futures for AECO are trading at C$4.08/GJ, while Dawn is trading at C$4.71/GJ. Prices have risen, with week-over-week increases of $0.12/GJ and $0.02/GJ at AECO and Dawn, respectively. Point Logic reports Canadian natural gas storage for the week ending January 6th was sitting at 521 Bcf, after an overall withdrawal of 8 Bcf. Eastern Canadian storage had a withdrawal of 0 Bcf, while Western Canadian storage had a withdrawal of 8 Bcf. Storage levels are now 9% below the 5-year average and 4% below prior year storage levels. Canadian storage is 60% full, with Eastern storage levels now at 76% of capacity and Western storage significantly lower at 53%. A net withdrawal of 12 Bcf is expected for the week ending tomorrow.
– Karyn Morrison, Energy Advisor
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