We’ve seen this movie one too many times. Just when natural gas prices are rallying across the world to multi-year or historic highs, another monkey wrench gets thrown into the workings of the Western Canadian gas market, imploding its suite of price markers. Last week, gas prices in Western Canada collapsed to mere pennies and even went negative for a time due to an unfortunate combination of pipeline restrictions and record-high production — a situation that will cost the region’s gas industry billions if left unchecked. In today’s RBN blog, we examine the root cause of the latest price collapse and when a turnaround might be expected.
Canadian crude output is rising, requiring new export routes. As traditional pathways face constraints, the U.S. Rockies—especially the Guernsey, WY hub—are emerging as key corridors for moving Canadian heavy crude to downstream markets, including the Gulf Coast.
If you are a natural gas producer in the U.S. or elsewhere, the present and near-term future for gas prices could not seem any brighter. Tight markets in Europe and Asia have sent LNG prices to record levels north of $50/MMBtu, while NYMEX prompt-month futures hit a 14-year high late last week. Henry Hub prices were well above $9/MMBtu at the start of this week as lower-than-average storage levels across the U.S. for this time of year, record levels of gas power burn this summer, and the ever-present pull from LNG exports (which will only get stronger once the Freeport LNG export terminal returns to service in November) have kept a very strong bid under prices. And, as we pointed out in Blurred Lines, that demand strength looks poised to continue as new LNG capacity on the U.S. Gulf Coast transforms the gas market there and around the world. Truly, these are amazing times to be a gas producer.
If you are a gas producer in Western Canada, however, you have been experiencing deeply discounted prices for most of the summer, made worse by a price crash last week. A combination of strong supplies and pipeline restrictions sent AECO day-ahead cash prices — the region’s primary gas price benchmark — plunging to just a few cents per MMBtu on August 18 (dashed red oval in left graph in Figure 1). Another closely watched price marker in the region, Station 2, turned negative for several days last week (dashed black oval in right graph) and only managed to limp into the positive side of the price ledger at the start of this week. Too low for zero, indeed!
Join Backstage Pass to Read Full Article
About the song
“Too Low for Zero” was written by Elton John and Bernie Taupin. It appears as the third song on side one of Elton John's 17th studio album of the same name. It was released as the fifth and final single from the album in February 1984 but did not chart on the Billboard Hot 100 Singles chart in the U.S. Personnel on the record were: Elton John (vocals, acoustic piano, synthesizer), Davey Johnstone (electric guitar, backing vocals), and Nigel Olsson (drums, backing vocals).
The album, Too Low for Zero, was recorded between September 1982 and January 1983 at AIR in Montserrat and Sunset Sound in Hollywood. Produced by Chris Thomas, the LP was released in May 1983 and went to #25 on the Billboard 200 Albums chart. It has been certified Platinum by the Recording Industry Association of America. The album was considered a comeback LP for Elton John, whose previous four albums failed to yield international hit singles. Four charting singles, including the hits “That’s Why They Call It the Blues” and “I’m Still Standing,” were released from the LP.
Sir Elton John (Reginald Kenneth Dwight) is a British singer, songwriter and pianist. He started playing piano at an early age and released his debut studio album, Empty Sky, when he was 22. He has released 31 studio albums, five live albums, 22 compilation albums, nine soundtrack albums, four EPs, and 140 singles. He has sold over 400 million records worldwide. Sir Elton has won two Academy Awards, six Grammy Awards, one Tony Award, nine Ivor Novello Awards, and two MTV Video Music Awards. He is a member of the Rock and Roll Hall of Fame and Songwriters Hall of Fame, and is a recipient of Kennedy Center Honors. He received a CBE in 1995 and was knighted by Queen Elizabeth II in 1998. He still records and is on a three-year farewell tour that ends in New Zealand in 2023.
