forwards

With natural gas prices reaching levels not seen in seven years, Western Canada is doing all it can to help increase gas supply, with recent data showing monthly production hitting multi-year highs. Moreover, Canadian forward gas prices are at the highest levels since 2014, gas pipeline expansions are in place or being constructed to accommodate future supply expansion, and gas-focused drilling activity remains strong — all of which may as well be a prescription for sending gas production to record levels later this year and in 2022. In today’s RBN blog, we provide an update on the recent gas production growth in Alberta and neighboring provinces and why more growth is coming.

The U.S. West Coast natural gas market is at the forefront of the energy transition, but regional natural gas prices are instead signaling the need for construction of newbuild gas pipeline capacity to the region. Without it, markets west of the Permian Basin have been hard-pressed to take advantage of the supply growth in West Texas and have struggled to consistently maintain adequate natural gas supplies for some time now. To make matters worse, last month, a segment of El Paso Natural Gas Pipeline (EPNG), a primary artery for moving Permian gas west, experienced a rupture, further tightening supplies. Today, we highlight the major market impacts and longer-term implications of the pipeline blast and subsequent flow restrictions.

With another month of anemic storage injections in September, Alberta natural gas storage levels remain on track to start the next heating season at a 13-year low. Still, while Alberta gas storage has been lagging well behind in terms of average injection rates and storage levels for many months now, forward winter contract prices for the Western Canadian gas price benchmark of AECO have budged only a little. There is potential for an improvement in storage injection rates during October after a recent regulatory approval affecting the Alberta gas pipeline system, but there is little time remaining in the current injection season to make much of a difference in inventory levels going into winter. Today, we conclude this two-part series with a look at why the AECO forward market remains largely unconcerned with low Alberta gas storage levels.

Alberta natural gas storage, one of the largest regional storage hubs in North America, is experiencing one of its slowest cumulative storage injection rates in years and could be headed to a 13-year low for storage levels by the end of the current injection season. That may seem ominous for the chilly Alberta and Canadian winter heating season, not to mention gas exports to the U.S. So far, though, winter gas forward prices for the Western Canadian gas price benchmark of AECO have registered a relatively modest market response, staying in line with last winter’s average spot price. Today, we take a closer look at the market’s apparent lack of concern over low Alberta gas storage.