Natural gas futures soared to a five-week high on Wednesday, to close at US$8.007/MMBtu, as record-breaking heat and supply concerns in Europe continue to increase demand. Prompt-month futures are up US$1.318/MMBtu from last week and US$4.131/MMBtu from a year earlier. Hot summer weather forecasts for the rest of July and early August will keep power burn demand for natural gas strong, as near-record-high coal prices make it uneconomical for natural gas-to-coal switching. Russia has resumed sending natural gas to Europe through the Nord Stream pipeline system after flows were halted for ten days of planned maintenance. There are still fears Russia may further scale back gas flows to Europe after the 60% cut from mid-June. The European Commission announced it is urging European countries to reduce gas usage by over 15% in the next seven months in case Russia curbs long-term supplies on the Nord Stream pipeline.
The EIA estimated working gas storage was 2,401 Bcf for the week ending July 15th, following an overall injection of 32 Bcf. The bullish build was below market expectations averaging 48 Bcf and less than the five-year average injection of 41 Bcf, keeping prices above US$8/MMBtu. Storage levels are now 10.1% below year-ago levels and, relative to the five-year average, 12% less.
In Canada, the July month-to-date AECO 5a spot rate is C$4.83/GJ, while the month-to-date Dawn Next Day weighted average index rate is currently C$7.45/GJ. Compared to June, when prices reached near 14-year highs, July spot prices have decreased 30% at AECO and 17% at Dawn. Prompt-month futures for AECO are trading at C$5.02/GJ, while Dawn is trading at C$9.55/GJ. Prices have risen, with week-over-week increases of $0.79/GJ and $1.64/GJ at AECO and Dawn, respectively, as hotter temperatures have increased natural gas-fired electricity demand. Point Logic reports Canadian natural gas storage for the week ending July 15th was sitting at 390 Bcf, after an overall injection of 19 Bcf. Eastern Canadian storage had an injection of 9 Bcf, and Western Canadian storage had an injection of 10 Bcf. Storage inventories are 24% below the 5-year average and 19% below storage levels last year at this time. Canadian storage is 45% full, with Eastern storage levels now at 59% of capacity and Western storage 39% full. An injection of 24 Bcf is expected for the week ending tomorrow.
– Karyn Morrison, Energy Advisor
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