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    US Gas Prices Ease After Storm

Summary

North American natural gas prices have come off the highs generated last week as a fierce winter storm battered the US Northeast.

by: Dale Lunan

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Natural Gas News, Americas, Market News, Infrastructure, LNG, Storage, Pipelines, News By Country, Canada, United States

US Gas Prices Ease After Storm

North American natural gas prices have come off the highs generated last week as a fierce winter storm battered the US Northeast and moderate weather forecasts offer little in the way of bullish price expectations going forward.

In his January 8 Weekly Canadian Natural Gas Supplement, Martin King, director of institutional research for investment bank GMP FirstEnergy, said prices at the beleaguered AECO Hub in Alberta “have started to settle back to a depressing weak reality.”

After approaching C$4/’000 ft3 early in the new year, as the “bomb cyclone” winter storm hit the Northeast and caused havoc in many cash markets, the AECO marker price has settled back under C$2/’000 ft3, even as prices a little to the east, at the Empress connection between the Nova Gas Transmission Limited (NGTL) system and TransCanada’s Mainline system to eastern Canada, remain above C$4/mn Btu after spiking above C$8/mn Btu.

The fact that Empress prices remain above AECO prices, King said, suggests there have been a series of physical short squeezes in markets across North America, including Empress.

“Industry observers are also telling us that the wide disparities between Empress and AECO pricing are indicating that there is yet another physical capacity limitation on the TCPL-Alberta system that is preventing sufficient volumes of gas leaving the AECO hub to the higher attractive prices at Empress, resulting in the wide AECO-Empress price spreads,” he said.

Despite the cold, storage levels in western Canada remain relatively healthy, King added, and expectations are that withdrawals for the rest of the heating season will stay close to average, “leaving storage levels at the high end of the historic range by the end of March, suggesting weak prices for the balance of 2018.”

The intense cold last week, King said, stretched the physical capacity of gas delivery networks to their limits, with a daily demand record set in Alberta on December 29 (7.04bn ft3) and Ontario experiencing its second-highest demand (6.18bn ft3) on January 5.

At the other end of the Canadian pipe, the cold caused wells to freeze-off, limiting supply and contributing to the price spikes. Canadian supply dipped below 15bn ft3/day on December 30, but has since recovered to around 17bn ft3/day, King said, close to the decade-high record of  17.14bn ft3 set on December 23.

Appalachian producers also experienced well freeze-offs during the storm, impacting supplies, pushing storage withdrawals sharply higher and contributing to the price spikes. According to the US Energy Information Administration, spot natural gas prices in New York City averaged an all-time high of US$140.25/mn Btu on January 5 but fell sharply over the past weekend, and averaged just US$13/mn Btu on January 8.

With supplies limited, calls went out for increased LNG imports, and the Canaport LNG terminal in the Atlantic Canada province of New Brunswick accepted a rare winter cargo from Trinidad on January 3. As well, a cargo departed the Isle of Grain terminal in the United Kingdom the evening of January 7 and is expected to arrive at the Everett, Massachusetts regasification terminal near Boston on January 22.