The price rollercoaster for natural gas continues, as markets closely watch near-term weather patterns. Henry Hub natural gas futures for December climbed over 60 cents on Monday, reversed on Tuesday, and then climbed back up 10% on Wednesday. Prompt-month futures have tumbled over 30 cents today, trading at US$5.89/MMBtu as of 3:15 EDT this afternoon. Market fundamentals remain tight as higher coal prices have increased demand for natural gas, and Freeport’s liquified natural gas (LNG) export facility in Texas (offline since June 8th) is poised to return to at least partial service in mid-November.
The EIA estimated working gas storage was 3,501 Bcf for the week ending October 28th, following an overall injection of 107 Bcf. The build exceeded market expectations averaging 98 Bcf and is more than double the five-year average injection of 45 Bcf. This is the sixth triple-digit storage injection in the past seven weeks, further decreasing the storage deficit. Storage levels are now 2.8% below year-ago levels and, relative to the five-year average, 3.7% less. An injection of 81 Bcf is expected for the week ending tomorrow, as we begin the winter season.
In Canada, the October AECO 5a spot rate settled at C$3.13/GJ, while the October Dawn Next Day weighted average index rate settled at C$6.56/GJ. Compared to September, October spot prices decreased 22% and 25% at AECO and Dawn, respectively. In Western Canada, October experienced similar levels of planned outages on the NOVA Gas Transmission Ltd. (NGTL) system to August, when the AECO 5a averaged $2.69/GJ. Pipeline constraints, due to extended seasonal maintenance, disrupted flows to storage, resulting in low storage inventories in Western Canada; this elevates the risk for winter price spikes if weather is colder-than-normal. Point Logic reports Canadian natural gas storage for the week ending October 28th was sitting at 637 Bcf, after an overall injection of 13 Bcf. Eastern Canadian storage had an injection of 8 Bcf, and Western Canadian storage had an injection of 5 Bcf. Storage levels are now 9% below the 5-year average and 6% below storage levels last year at this time. Canadian storage is 73% full, with Eastern storage levels now at 99% of capacity and Western storage significantly lower at 62%. An injection of 2 Bcf is expected for the week ending tomorrow. HIS Markit reports Canadian gas-directed rig counts have risen from 49 rigs in June to 67 rigs in October, as stronger natural gas prices support production. Canadian production is expected to rise by 1.3 Bcf/d in 2022 and grow 1.1 Bcf/d winter-to-winter, averaging 17.9 Bcf/d.
– Karyn Morrison, Energy Advisor