Henry Hub natural gas futures for October retreated the past few days, falling below US$8/MMBtu to close at US$7.842/MMBtu on Wednesday. US dry gas production continues to rise, reaching year-to-date highs in late August. As reported in the EIA September Short-Term Energy Outlook, US dry gas production is forecasted to average 99 Bcf/d in the fourth quarter of 2022, 4.7% more than the first quarter of 2022, and increase to average 100.4 Bcf/d in 2023. A drop in European natural gas prices and the fear of a recession have helped put downward pressure on domestic prices, but market fundamentals will remain bullish until the storage deficit is reduced.

The EIA estimated working gas storage was 2,694 Bcf for the week ending September 2nd, following an overall injection of 54 Bcf. The build was in line with market expectations but lower than the five-year average injection of 65 Bcf. Storage levels are now 7.6% below year-ago levels and, relative to the five-year average, 11.5% less. We are expecting an injection of 64 Bcf for the week ending tomorrow. The EIA forecasts inventories will end the injection season (end of October) 7% less than the five-year average.

In Canada, prompt-month futures for AECO are trading at C$4.68/GJ, while Dawn is trading at C$8.83/GJ. Prices have fallen, with week-over-week decreases of $1.56/GJ and $1.50/GJ at AECO and Dawn, respectively. AECO spot market prices have started to recover from suppressed prices in August, when record high Western Canada production and maintenance on Alberta’s NOVA Gas Transmission Ltd. (NGTL) pipeline system resulted in a shortage of takeaway capacity. Point Logic reports Canadian natural gas storage for the week ending September 2nd was sitting at 549 Bcf, after an overall injection of 20 Bcf. Eastern Canadian storage had an injection of 12 Bcf, and Western Canadian storage had an injection of 8 Bcf. Storage inventories are 11% below the 5-year average and 5% below storage levels last year at this time. Canadian storage is 63% full, with Eastern storage levels now at 80% of capacity and Western storage 56% full. An injection of 17 Bcf is expected for the week ending tomorrow.

– Karyn Morrison, Energy Advisor

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