Cold drives western Canadian natural gas higher
Persistently cold temperatures across much of western Canada drove natural gas prices higher on January 6, with spot gas at the benchmark AECO hub in Alberta trading at a premium to Henry Hub in the US.
The AECO spot price settled at C$5.30/GJ (US$3.96/mn Btu), the highest since October, as temperatures with wind chills factored in plunged to as low as -40°C, driving residential and heating demand higher and impacting wells and compressors on gas gathering and distribution systems. In the last week of December, according to RBN Energy analyst Martin King, gas demand in Alberta increased from 7.29bn ft3/day on December 28 to 7.96bn ft3/day on December 31.
“On the coldest days, NGTL (Nova Gas Transmission Limited) receipts were off more than 1.5bn ft3/day, which required deliveries to be cut to oil sands and heavy oil industrial consumers,” Darren Gee, CEO of Deep Basin producer Peyto Exploration & Development, said in his monthly report to shareholders. “Firm deliveries to the export markets beyond Alberta’s borders were next in line.”
Draws on storage have also risen in line with the cold, which has persisted across much of western Canada for the last two weeks, Gee said. Late in December, withdrawals were averaging close to 3bn ft3/day, and if the rest of the winter is anything like last year, he said, storage levels could drop to less than 150bn ft3by the end of the heating season on March 31.