Canadian Gas Lobbyist Sees Good Winter Ahead
Nearly 125,000 new natural gas customers in Canada are expected to see continued low prices for the 2019-2020 winter heating season, the Canadian Gas Association (CGA) said November 14 in its annual natural gas heating season report.
The CGA, which represents Canadian gas utilities serving more than 7.1mn end-use locations, said natural gas prices heading into the winter heating season, which runs from November 1 through March 2020, are averaging about C$1.44/GJ (US$1.09/GJ), about $0.04/GJ below comparable levels a year ago.
Current futures strips, the association’s report says, show prices in the C$2.21/GJ to C$2.59/GJ range for volumes delivered during the winter heating season – suggesting natural gas customers will continue to have some of the lowest-cost energy available this winter.
Those same low commodity prices, however, have impacted the Canadian producer community, and production levels have stabilised, although the CGA was quick to remind that supply remains abundant heading into the winter.
“Both the Canada Energy Regulator (formerly the National Energy Board) and Statistics Canada data show that the production of marketable natural gas eased off in 2019, ending the growth trend seen since 2013,” the report said. “This suggests that low prices have started to have an impact on the production of natural gas in Canada.”
At the same time, however, “strong affordability” continues to drive demand for natural gas in homes and businesses, as well as for power generation.
But some price escalation could be in the cards for consumers, the CGA report says, as storage caverns in both Canada and the US have been slow to refill this summer season – reflecting pipeline access issues in western Canada and strong demand from the growing LNG export sector in the US – and are now at record low minimum levels for this late in the storage injection season.
“The combination of growing natural gas demand and the trend by market players in recent years to run leaner storage cushion means there is more exposure to upward price pressure triggered by adverse cold winter weather events,” the report says. “That said, the abundant, low cost natural gas supply situation is allowing market participants to wait longer for their storage replenishments.”
Finally, current forecast models from Environment Canada are predicting a low probability for both below normal temperatures and above normal precipitation this winter, implying that natural gas supply is not expected to face unusual pressures over the coming heating season. However, if colder than expected temperatures push demand higher, some upward pressure on prices could develop, given low storage levels, the CGA warns.