Henry Hub futures continue to plunge, falling below US$3/MMBtu for the first time since spring 2021. Prompt-month futures are trading at US$2.77/MMBtu as of 2:15pm EDT Thursday afternoon, 70% lower than the highs in August 2022. Warmer than expected weather forecasts, which would reduce heating demand, along with strong US natural gas production, around 100 Bcf/d, has driven prices lower. The abnormally mild weather this winter in both Europe and North America has pushed natural gas storage inventories into a surplus, well above the five-year average for this time of year. Some market analysts think the Freeport liquified natural gas (LNG) export plant in Texas, which has been offline since June 2022, will not actually restart for weeks or months, allowing domestic storage inventories to grow. The restart, originally planned for October 2022, has been delayed numerous times. Once Freeport returns, demand for US LNG will increase as the plant can turn about 2.1 Bcf/d of gas into LNG, which is ~2% of US daily production.

The EIA estimated working gas storage was 2,729 Bcf for the week ending January 20th, following an overall withdrawal of 91 Bcf. The pull was considerably lower than the five-year historic average withdrawal of 185 Bcf, but above market expectations averaging 82 Bcf. Storage levels are now 4.1% above year-ago levels and, relative to the five-year average, 4.9% greater.

In Canada, the January month-to-date AECO 5a spot rate is C$3.64/GJ, while the month-to-date Dawn Next Day weighted average index rate is currently C$4.22/GJ. Spot market prices are now lower than this time last year, as milder temperatures have reduced domestic consumption. Canadian heating degree-days over the last week were 21% below the same week last year and 10% below the ten-year normal. Point Logic reports Canadian natural gas storage for the week ending January 20th was sitting at 480 Bcf, after an overall withdrawal of 16 Bcf. Eastern Canadian storage had a withdrawal of 10 Bcf, while Western Canadian storage had a withdrawal of 6 Bcf. Storage levels have now risen 4.6% above prior year storage levels but remain 6% below the five-year average. Canadian storage is 55% full, with Eastern storage levels now at 67% of capacity and Western storage at 51%. A net withdrawal of 9 Bcf is expected for the week ending tomorrow.

– Karyn Morrison, Energy Advisor

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