September 24, 2024 [Reuters]- Canadian natural gas prices slumped to their lowest level in more than two years on Monday and are expected to remain under pressure for weeks, as storage levels in Alberta reach full capacity due to weak demand across North America.
Next-day gas prices at the AECO hub in Alberta fell to 5 Canadian cents per million British thermal units (mmBtu), their lowest level since August 2022, according to data from financial firm LSEG.
The AECO benchmark has been trending lower throughout 2024 following a mild winter that left Canada, the world’s sixth-largest natural gas producer, with a significant surplus of supply.
Now summer air conditioning demand is winding down and storage levels in Alberta are very close to being full, said RBN Energy analyst Martin King, who warned prices would struggle to meaningfully recover until colder weather starts to bite in late October.
“It seems pretty clear we are going to stay weak until we get a demand pickup because we are running out of places to put the gas,” King said.
Alberta has 504 billion cubic feet (bcf) of natural gas storage, according to RBN, which is essentially full. British Columbia and Saskatchewan have a further 80 bcf of capacity, of which 36 bcf is still available. Overall western Canadian storage levels are 30% higher than the three-year average for this time of year.
Months of subdued AECO prices have already prompted a number of major producers, including ARC Resources and Canadian Natural Resources, to shut in or delay completing natural gas wells.
Field receipts showing how much gas producers are putting onto pipelines systems, a proxy for wellhead production, have come off in the last three weeks, suggesting even more companies are responding to low prices by shutting in production, RBN’s King said.
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