Prompt month has rolled over to May and Henry Hub natural gas futures are trading at US$2.10/MMBtu as of 3:00pm EDT Thursday afternoon, down over 20 cents from last Friday’s close of US$2.36/MMBtu. Mild weather forecasts continue to put downward pressure on prices despite the volume of gas flowing to liquified natural gas (LNG) export plants, on track to reach a monthly high as the Freeport LNG export plant in Texas resumed operations after an eight-month outage. The market is down significantly in the first quarter of 2023, a sharp contrast to the 14-year market highs in 2022, as record high production and warmer-than-normal temperatures improved storage inventories at an aggressive pace.
The EIA estimated working gas storage was 1,853 Bcf for the week ending March 24th, following an overall withdrawal of 47 Bcf. The bearish pull was below market expectations averaging 56 Bcf. Storage levels are now 31.3% above year-ago levels and, relative to the five-year average, 21% greater. An average decrease of 20 Bcf is expected for the week ending tomorrow.
In Canada, the March month-to-date AECO 5a spot rate is C$3.00/GJ, while the month-to-date Dawn Next-Day weighted average index rate is currently C$3.22/GJ. Point Logic reports Canadian natural gas storage for the week ending March 24th was sitting at 350 Bcf, after an overall withdrawal of 8 Bcf. Eastern Canadian storage had a pull of 8 Bcf, while Western Canadian storage had a zero net withdrawal. The storage surplus continues to widen, with levels now 71% above prior-year storage levels and 19% greater than the five-year average. Canadian storage is 40% full, with Eastern storage levels now at 40% of capacity and Western storage at 41%. A net withdrawal of 2 Bcf is expected for the week ending tomorrow. S&P Global reports strong production and warmer weather has improved storage inventories, with withdrawals for winter 2022/23 expected to average 2.2 Bcf/d, over 1 Bcf/d lower than last winter. In other news, on April 1st, 2023, the federal carbon tax will increase from $50 to $65 per tonne. The carbon charge for natural gas will increase to 12.39 cents per cubic meter, up from the previous rate of 9.79 cents per cubic meter. The rate is set by the Government of Canada and is part of a multi-year plan. This charge increases annually each April, with a rate increase to $80 per tonne (15.25¢/m3) for April 2024.
– Karyn Morrison, Energy Advisor