Henry Hub prompt month futures continue to hover around the mid-$2 range, trading at US$2.53/MMBtu as of 1:30pm EDT Thursday afternoon. Milder winter weather in January and February significantly reduced heating demand, pushing storage inventories into a surplus well above historical averages. Prices are forecasted to remain depressed heading into the shoulder season, but the risk of volatility returns in the summer as high coal prices widen the spread between coal and natural gas prices, spurring on strong demand for natural gas used to generate electricity, also known as power burn.
The EIA estimated working gas storage level was at 1,972 Bcf for the week ending March 10th, following an overall withdrawal of 58 Bcf. The pull was within market expectations ranging from 49 to 76 Bcf, but was another bearish storage withdrawal compared to the five-year average of 77 Bcf. Storage levels are now 35.9% above year-ago levels and, relative to the five-year average, 23.7% greater. With cooler temperatures, a decrease of 80 Bcf is estimated for the week ending tomorrow, compared to the five-year average withdrawal of 45 Bcf.
In Canada, prompt-month futures for AECO are trading at C$2.68/GJ, while Dawn is trading at C$3.24/GJ. Prices have fallen, with week-over-week decreases of $0.03/GJ and $0.15/GJ at AECO and Dawn, respectively. Point Logic reports Canadian natural gas storage for the week ending March 10th was sitting at 364 Bcf, after an overall withdrawal of 20 Bcf. Both Eastern and Western Canadian storage had a pull of 10 Bcf. Storage levels are now in a surplus, 61% above prior-year storage levels and 14% greater than the five-year average. Canadian storage is 42% full, with Eastern storage levels now at 44% of capacity and Western storage at 42%. A net withdrawal of 13 Bcf is expected for the week ending tomorrow.
In other news, the Cedar liquified natural gas (LNG) facility and marine export terminal proposed by the Haisla Nation near Kitimat, B.C, has been granted environmental approval by the BC government. The LNG facility must pass an emissions test with a plan to be net zero by 2030. The construction cost is estimated at more than $3 billion and is the largest First Nations-owned infrastructure project in Canada, with an economic opportunity to employ 500 people during construction and support 100 full-time jobs once operational. The plant will be powered by hydroelectricity, with natural gas fed in for liquifying through a pipeline that will connect to the Coastal GasLink pipeline. Commercial operations are expected to begin in 2027, with a storage capacity for up to 250,000 m3 of LNG.
– Karyn Morrison, Energy Advisor
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