Natural gas futures continue to experience large daily price swings, with Henry Hub prompt-month futures trading at US$6.51/MMBtu as of 1:45pm EDT Thursday afternoon, up over 30 cents from yesterday’s close of US$6.20/MMBtu. Despite news of the delayed restart of the Freeport LNG export plant in Texas and warmer temperatures to start November, forecasts of colder winter weather and the ongoing energy crisis in Europe have pushed prices higher. Once the Freeport facility restarts, the risk of higher domestic gas prices remains over the winter as the geopolitical pressures from Russia have increased European demand for natural gas. Prices are forecasted to decline in Spring 2023 as growth in US dry gas production outpaces consumption and LNG exports.

The EIA estimated working gas storage was 3,644 Bcf for the week ending November 11th, following an overall injection of 64 Bcf. The build has now pushed storage levels 0.1% above year-ago levels and narrowed the deficit to only 0.2% below the five-year average. The injection was in line with market expectations and significantly larger than the five-year average withdrawal of 5 Bcf. A withdrawal of 47 Bcf is expected for the week ending tomorrow. As reported by the EIA, US dry gas production increased 5% (4.7 Bcf/d) during the 2022 injection season, averaging 97.2 Bcf/d compared to 92.5 Bcf/d in the 2021 injection season.

In Canada, prompt-month futures for AECO are trading at C$5.78/GJ, while Dawn is trading at C$7.58/GJ. Prices have risen, with week-over-week increases of $0.43/GJ and $0.40/GJ at AECO and Dawn, respectively. Point Logic reports Canadian natural gas storage for the week ending November 11th was sitting at 640 Bcf, after an overall withdrawal of 1 Bcf. Eastern Canadian storage had the first withdrawal of the season at 6 Bcf, while Western Canadian storage had an injection of 5 Bcf. Storage levels are now 8% below the 5-year average and 5% below storage levels last year at this time. Canadian storage is 73% full, with Eastern storage levels now at 93% of capacity and Western storage significantly lower at 66%. A withdrawal of 2 Bcf is expected for the week ending tomorrow.

Natural gas exports from Canada to the US have strengthened this year, expected to average 5.6 Bcf in 2022, up 0.5 Bcf/d from 2021. The EIA reports that, while Canadian natural gas exports have declined from the highs in the 2000s, they remain essential to help stabilize and balance gas markets in parts of the US. Canadian suppliers can quickly increase flows to US markets to support seasonal consumption fluctuations during winter and summer peaks. Over the twelve-month period through July 2022, Canadian exports accounted for an 8% average of US natural gas supply.

– Karyn Morrison, Energy Advisor

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