Calgary Herald - First EnergyThe recent rally in natural gas prices — which recovered to around $2.50/mcf in July after tumbling to 50 cents in May following the Fort McMurray wildfires — is over, at least in the short term.
The spot price at AECO dropped 45 cents on Wednesday, closing at just 53 cents/mcf.
The dramatic drop was expected by FirstEnergy commodity analyst Martin King, due largely to a warm winter that kept more gas in storage.
“Storage is almost full in Alberta, there is maintenance taking place that is restricting about 700 mmcf/d of gas from being exported and demand is decreasing in the U.S. as temperatures are cooling. All this has pushed spot prices below $1/mcf,” said King, who is still eyeing a recovery for the commodity.
“Once we get out of summer and into fall, I’m wildly bullish about natural gas. The U.S. has injected half the gas into storage this year than it did last year at this time, and there are structural demand changes at play — whether in the power sector, exports to Mexico or liquefied natural gas,” said King, adding all these factors should eliminate the U.S. surplus by early October.
King is also of the view the hyper focus on U.S. crude oil storage is missing the bigger picture for oil, which is that crude oil markets are balanced in the rest of the world.
“The U.S is only part of the picture. It’s the only jurisdiction that is oversupplied. Everyone else is relatively balanced,” he said.
Deborah Yedlin, Calgary Herald