Henry Hub natural gas futures continue to hold below US$7/MMBtu, trading at US$6.71/MMBtu as of 2:30pm EDT Thursday afternoon. Strengthening US gas production and reduced LNG exports have contributed to robust storage injections, further reducing the storage deficit heading into the winter heating season. US dry gas production is estimated at 99.5 Bcf/d, with the EIA forecasting natural gas production to average 99.1 Bcf/d in the fourth quarter of 2022 and increase to average 99.6 Bcf/d in 2023. The continuing Russia/Ukraine war and energy crisis have had an upending effect on the stability of global energy prices and global energy-intensive manufacturing. These have exacerbated inflation, put increasingly heavy pressure on US LNG export demand, and essentially changed global energy trade for the foreseeable future. With a colder-than-average winter forecasted, we expect volatility to persist over the winter season.
The EIA estimated working gas storage was 3,231 Bcf for the week ending October 7th, following an overall injection of 125 Bcf. The build was in line with market expectations, and larger than the five-year average injection of 82 Bcf. Storage levels are now 3.8% below year-ago levels and, relative to the five-year average, 6.4% less. The EIA forecasts inventories will end the injection season (end of October) 6% less than the five-year average.
In Canada, prompt-month futures for AECO are trading at C$5.65/GJ, while Dawn is trading at C$7.83/GJ. Prices have fallen, with week-over-week decreases of $0.15/GJ and $0.56/GJ at AECO and Dawn, respectively. AECO spot prices have dropped over the past few days, because of further maintenance on the NOVA Gas Transmission Ltd. (NGTL) system, an unplanned compressor failure and gas injection restrictions. Point Logic reports Canadian natural gas storage for the week ending October 7th was sitting at 604 Bcf, after an overall injection of 12 Bcf. Eastern Canadian storage had an injection of 7 Bcf, and Western Canadian storage had an injection of 5 Bcf. Storage levels are now 12% below the 5-year average and 10% below storage levels last year at this time. Canadian storage is 69% full, with Eastern storage levels now at 92% of capacity and Western storage significantly lower at 60%. An injection of 11 Bcf is expected for the week ending tomorrow.
The Alberta Government Natural Gas Rebate is in effect starting October 1, 2022 through to March 31, 2023. The program provides eligible sites (annual consumption less than 2,500 GJ) with a monthly rebate if the regulated monthly natural gas rate charged by any one of Alberta’s 3 regulated utility providers is above $6.50 per gigajoule. Since the highest default rate for October was $5.632/GJ, a rebate will not be provided for the month of October. For more information, please visit https://www.alberta.ca/affordability-programs.aspx.
– Karyn Morrison, Energy Advisor