Canadian Natural Gas Market Update - Dec 16
Posted: Wed Dec 16, 2020 2:09 pm
From CIBC Equity Research:
The Natural Gas Guide
Weekly Review Of North American Natural Gas Fundamentals
North American natural gas prices have rebounded sharply in the past week
as winter heating demand has finally picked up. Western Canadian
temperatures dropped sharply toward the end of last week, while forecasts
are calling for a winter snowstorm to blanket the U.S. Northeast by the
middle of this week. Henry Hub closed Monday at US$2.68/MMBtu (up
US$0.28/MMBtu W/W), and AECO prices closed at C$2.64/Gj (up C$0.50/Gj
W/W). Cash AECO prices traded as high as C$2.98/Gj on Monday. Strip
prices have firmed up quite a bit in the past week as well, with NYMEX
rallying US$0.23/MMBtu W/W, to close Monday at US$2.75/MMBtu, and the
AECO strip moving up C$0.31/Gj W/W, to close Monday at C$2.45/Gj.
International gas prices have also continued to rally as temperatures drop
around the northern hemisphere. Netherlands TTF and UK NBP spot prices
were both up 15-20% W/W, closing Friday at US$5.99/Mcf, while JKM prices
reached US$12.00/Mcf yesterday. In response to the widening transportation
arb, U.S. LNG exports have been flowing near capacity in recent days;
export feedgas averaged 11.3 Bcf/d last week (up 0.6 Bcf/d W/W) and hit
11.6 Bcf/d on Monday.
Canadian supply/demand fundamentals remain encouraging, despite recent
weakness in spot pricing. WCSB field receipts averaged 16.0 Bcf/d last
week, still 0.1 Bcf/d below prior year levels, and in line with the seasonal
plateau we tend to see at this time of year. Baker Hughes showed a modest
decline in the Canadian rig count last week, with 59 gas rigs active in the
WCSB (down three rigs W/W). It’s possible that recent weakness in strip
pricing has shaken out the temptation to increase production next year,
particularly as activity was set to decline into the Christmas break. Oil drilling
activity has ramped up sharply, with the rig count increasing from 38 to 52 in
two weeks. Intra-basin demand has also shown signs of rebounding, a trend
that will likely continue into this week as cold weather persists; WCSB
deliveries averaged 6.8 Bcf/d last week, up 0.3 Bcf/d W/W. Western
Canadian storage inventories have shown healthy declines the past two
weeks, with back-to-back draws of 8 Bcf. Inventories are still high by
historical standards (we are about 15% above trailing five-year average
levels, and 45% above the same period last year), but the early pull on
storage is an encouraging sign.
The Natural Gas Guide
Weekly Review Of North American Natural Gas Fundamentals
North American natural gas prices have rebounded sharply in the past week
as winter heating demand has finally picked up. Western Canadian
temperatures dropped sharply toward the end of last week, while forecasts
are calling for a winter snowstorm to blanket the U.S. Northeast by the
middle of this week. Henry Hub closed Monday at US$2.68/MMBtu (up
US$0.28/MMBtu W/W), and AECO prices closed at C$2.64/Gj (up C$0.50/Gj
W/W). Cash AECO prices traded as high as C$2.98/Gj on Monday. Strip
prices have firmed up quite a bit in the past week as well, with NYMEX
rallying US$0.23/MMBtu W/W, to close Monday at US$2.75/MMBtu, and the
AECO strip moving up C$0.31/Gj W/W, to close Monday at C$2.45/Gj.
International gas prices have also continued to rally as temperatures drop
around the northern hemisphere. Netherlands TTF and UK NBP spot prices
were both up 15-20% W/W, closing Friday at US$5.99/Mcf, while JKM prices
reached US$12.00/Mcf yesterday. In response to the widening transportation
arb, U.S. LNG exports have been flowing near capacity in recent days;
export feedgas averaged 11.3 Bcf/d last week (up 0.6 Bcf/d W/W) and hit
11.6 Bcf/d on Monday.
Canadian supply/demand fundamentals remain encouraging, despite recent
weakness in spot pricing. WCSB field receipts averaged 16.0 Bcf/d last
week, still 0.1 Bcf/d below prior year levels, and in line with the seasonal
plateau we tend to see at this time of year. Baker Hughes showed a modest
decline in the Canadian rig count last week, with 59 gas rigs active in the
WCSB (down three rigs W/W). It’s possible that recent weakness in strip
pricing has shaken out the temptation to increase production next year,
particularly as activity was set to decline into the Christmas break. Oil drilling
activity has ramped up sharply, with the rig count increasing from 38 to 52 in
two weeks. Intra-basin demand has also shown signs of rebounding, a trend
that will likely continue into this week as cold weather persists; WCSB
deliveries averaged 6.8 Bcf/d last week, up 0.3 Bcf/d W/W. Western
Canadian storage inventories have shown healthy declines the past two
weeks, with back-to-back draws of 8 Bcf. Inventories are still high by
historical standards (we are about 15% above trailing five-year average
levels, and 45% above the same period last year), but the early pull on
storage is an encouraging sign.