US natural gas booming, Canadian sector suffers low prices, stiff competition in traditional markets

Canadian imports into the US market declined 0.10 Bcf/d last week – Drillinginfo

The North American natural gas market is closely interconnected via pipelines. Supply or demand events in one region often impact prices elsewhere. For this reason, analysis of the Canadian natural gas market happens in the context of North America (Canada and the United States (U.S.); and increasingly Mexico), according to the National Energy Board.

2018 marked several major milestones in the North American natural gas market. Combined Canadian and U.S. natural gas production reached a record high in August, when production reached 101 billion cubic feet per day (Bcf/d).

Demand also saw a record high in 2018 when it increased to 121 Bcf/d in January 2018.

Natural gas storage is used to balance the market when demand is greater than supply.

Warmer temperatures caused US residential and commercial demand to drop by 8.94 Bcf/d, while power demand and industrial demand fell 1.46 Bcf/d and 0.64 Bcf/d, respectively, according to the Drillinginfo weekly report. LNG exports are down 0.27 Bcf/d on the week, while Mexican exports increased 0.13 Bcf/d. Total supply gained 0.03 Bcf/d, while total demand dropped 10.95 Bcf/d.

The storage report last week came in with a withdrawal of 141 Bcf. Similar to the previous week, the market was declining, and the release accelerated the declines into the close, says Drillinginfo.

Due to record high natural gas demand in 2018, combined Canadian and U.S. natural gas storage levels are below the 5 year minimum heading into 2019. As of 7 December 2018, storage inventories totalled 3 528 Bcf; 18% below the 5 year average and 8% below the 5 year minimum. Low storage, in combination with a ramp-up of seasonal space heating demand, resulted in a natural gas commodity price increase in November and December, according to the NEB.

In Canada, monthly average natural gas prices increased to $5.61 per gigajoule (GJ) in Ontario in December; an increase of 47% from the 2018 12 month annual average of $3.80/GJ. At the Alberta and northern British Columbia hubs natural gas prices remained low, due to production growth outpacing pipeline capacity takeaway expansions. In British Columbia’s Lower Mainland, FortisBC customers are encouraged to decrease their natural gas consumption, due to lower supply availability following a pipeline rupture north of Prince George.

In the U.S., monthly average natural gas prices at the Henry Hub in Louisiana increased to $5.65/GJ in December.

According to the U.S. Energy Information Admnistration (EIA), growth in U.S. natural gas production will put downward pressure on prices in 2019. EIA forecasts Henry Hub natural gas spot prices to average $4.21/GJ in 2019. Canada’s Energy Future 2018 assumes that the Alberta natural gas price will average $2.15/GJ in 2019.

Facebook Comments

Leave a Reply

Your email address will not be published.