Natural gas futures have retreated to an eleven-week low, with Henry Hub natural gas futures for July trading at US$6.26/MMBtu as of 2:30pm EDT Thursday afternoon. Futures have fallen over 28% from the high of US$9.66/MMBtu on June 8th before the Freeport liquified natural gas (LNG) export terminal explosion. With the Freeport shutdown expected to last three months, it has reduced the amount of LNG exports to Europe, assisting to boost domestic storage inventories before the winter withdrawal season. Signs of cooler-than-normal weather patterns for parts of the US have the potential to reduce power burn demand in the days ahead putting further downward pressure on futures. Despite the recent declines, US natural gas futures are still up ~84% this year as higher prices in Europe and Asia keep demand for US LNG exports robust, especially since the Russian invasion of Ukraine. Dry gas production is currently estimated at 94.5 bcf/d and is forecasted to increase, though slow and steady, and not likely to alleviate the current tight supply situation. Weather forecasts will be a key driver of volatility in the upcoming months.

The EIA estimated working gas storage was 2,169 Bcf for the week ending June 17th, following an overall injection of 74 Bcf. The bearish build was above market expectations averaging 66 Bcf, pushing prices lower this morning. Storage levels are now 12.3% below year-ago levels and, relative to the five-year average, 13.2% less.

In Canada, prompt-month futures for AECO are trading at C$6.43/GJ, while Dawn is trading at C$8.07/GJ. Prices have fallen, with week-over-week decreases of $0.78/GJ and $0.73/GJ at AECO and Dawn, respectively. Point Logic reports Canadian natural gas storage for the week ending June 17th was sitting at 323 Bcf, after an overall injection of 20 Bcf. Eastern Canadian storage had an injection of 15 Bcf, and Western Canadian storage had an injection of 5 Bcf. Storage inventories are 28% below the 5-year average and 24% below storage levels last year at this time. Canadian storage is 37% full, with Eastern storage levels now at 50% of capacity and Western storage 32% full. An injection of 22 Bcf is expected for the week ending tomorrow.

Last week, The OEB approved Enbridge’s rate application indicating all Enbridge and Union delivery areas’ rates will increase as of July 1st. System supply customers can expect their overall rate per cubic metre to go up by 19%-23%, depending on the delivery area, with the commodity portion of the rate rising by 52%-70%, due to elevated commodity prices. Going forward, the OEB has approved a plan for rate increases to be mitigated and smoothed out over as long as 24 months if required, but the utility and the OEB both want utility commodity prices to reflect market prices as much as possible. For natural gas customers who purchase through a marketer, July distribution rates are also rising; however, only by a nominal 3.7%.

– Karyn Morrison, Energy Advisor / Grace Wilton, Senior Energy Advisor

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