EQUITY RESEARCH
April 18, 2024 Industry Update
Natural Gas Guide: U.S. Gas Production
Dips Below 100 Bcf/d
Feedgas To Several U.S. LNG Facilities Also Dropped Sharply
A Few Things We Are Watching
NGTL system continues normal operation following a rupture earlier
this week: Last week, Western Canadian field receipts stayed relatively flat
at 17.8 Bcf/d, while demand decreased by 0.5 Bcf/d to 7.4 Bcf/d. NGTL
system flows appear to be uninterrupted following an explosion on a section
of the system located in northwest Alberta. Forward benchmarks for AECO
remain very subdued, currently sitting at <US$1/MMbtu over the May to
September 2024 time period. The Willow Valley Interconnect, which ties into
the Coastal Gas Link system, is expected to start reporting flow and
nomination information as early as next week. Western Canadian storage
increased by 8 Bcf to 361 Bcf, which is 150 Bcf above the five-year average.
NYMEX closed Wednesday at US$1.50/MMBtu (down US$0.39 W/W).
AECO basis narrowed to US$0.56/MMBtu below NYMEX (-US$0.83/MMBtu
last week) and Station 2 basis narrowed to US$0.66/MMBtu below NYMEX
(-US$1.04/MMBtu last week).
U.S. dry gas production showing further moderation: According to Platts,
U.S. dry gas production averaged 101 Bcf/d last week; however, it has
dipped below 100 Bcf/d since then. The drop in production was met with
concurrent outages in several LNG facilities across the U.S., including
Cameron and Corpus Christi LNG. Short-term weather forecasts indicate
above-average temperatures across the U.S., which may elevate the
seasonal demand for natural gas fired power earlier than expected. High
demand for power burn, combined with declining production, and the ramp
up in U.S. LNG export capacity as facility maintenance subsides, could
tighten the supply and demand of natural gas over the coming weeks. U.S.
gas in storage increased by 50 Bcf last week, versus consensus
expectations for a 52 Bcf build. At 2,333 Bcf, stocks were 424 Bcf above the
same period in 2023 and 622 Bcf above the five-year average.
European Network of Transmission System Operators for Gas
(ENSTOG) warned additional demand measures may be required in the
event of supply disruptions in order to fill up 90% of storage capacity:
Lower LNG imports, along with a halt in the remaining gas-piped flows from
Russia, may prompt additional demand measures in Europe to ensure gas in
storage will reach its 90% capacity target ahead of November 1, 2024. We
note the JKM-TTF differentials have widened recently, which should direct
more LNG cargoes to Asia. European inventories increased by 67 Bcf to
reach 2,386 Bcf, widening the surplus over the five-year average by 45 Bcf
to 764 Bcf. NBP closed Wednesday at US$9.62/MMBtu (up US$1.60/MMBtu
W/W), while Netherlands TTF closed at US$8.56/MMBtu (down
US$0.06/MMBtu W/W). JKM closed at US$10.75/MMBtu (up
US$1.16/MMBtu W/W)