CIBC Notes EQUITY RESEARCH
June 15, 2023 Industry Update
Natural Gas Guide: Biggest European Gas
Field Is Set To Shut Down
Hot Weather In The U.S. Likely To Drive Strong Power Demand
A Few Things We Are Watching
Another week of wildfires impacts WCSB production, but recent rainfall
should be helpful. Canadian field receipts decreased by 0.4 Bcf/d to
average 16.2 Bcf/d, in line with the same period in 2022, as wildfires flared
up with recent dry weather. Demand remains flat at 6.3 Bcf/d (10% above
the seasonal average). We are not aware of any damage to gas plant or well
infrastructure; however, power poles continue to fall victim to wildfires which
is impacting power delivery to certain facilities. Western Canadian storage
increased by 11 Bcf last week to 303 Bcf, which is 9 Bcf above the five-year
range, widening the surplus over the five-year average to 41 Bcf. AECO
basis narrowed this week versus major hubs despite a material drop in
volumes out of East Gate. We expect high injections to Western Canadian
storage to continue as current differentials versus other hubs are not
attracting molecules out of the basin. NYMEX closed Wednesday at
US$2.00/MMBtu (up US$0.05/MMBtu W/W). AECO basis closed at
US$0.04/MMBtu below NYMEX (-US$0.36/MMBtu last week), and Station 2
basis closed at US$0.08/MMBtu below NYMEX (-US$0.52/MMBtu last
week).
U.S. storage surplus versus the five-year average persists despite
lower than expected build. U.S. gas in storage increased by 84 Bcf last
week, below consensus expectations that were calling for a 94 Bcf build. At
2,634 Bcf, stocks were 552 Bcf above the same period in 2022 and 353 Bcf
above the five-year average. U.S. power burn declined by 2 Bcf/d vs. the
prior week to 34.7 Bcf/d, which is 3.1 Bcf/d above the five-year high. Power
burn is expected to remain strong as much of the U.S. is experiencing above
seasonal temperatures. NextDecade Corporation announced that it has
entered into a financing agreement with Global Infrastructure Partners (GIP)
and Total Energies that enables the company to make the final investment
decision (FID) for the first three trains of the Rio Grande LNG project.
Additionally, Total Energies has agreed to buy ~0.7 Bcf/d of LNG from the
project for 20 years. NextDecade expects to make the FID by the end of the
second quarter. The first three trains of Rio Grande LNG have total capacity
of 2.3 Bcf/d with an expected in-service date of 2027.
TTF increased by more than 20 percent as Netherlands plans to
permanently shutdown Europe’s biggest gas field this year. European
inventories increased by 76 Bcf and reached 2.8 Tcf, which is 730 Bcf above
the five-year average. With inventories sitting comfortably above the five-
year average, the Dutch government is planning to close the Groningen gas
field in October, a year earlier than its original plan according to Bloomberg.
NBP closed Wednesday at US$11.72/MMBtu (up US$3.82/MMBtu W/W),
while Netherlands TTF closed at US$10.82/MMBtu (up US$2.47/MMBtu
W/W). JKM closed at US$9.40/MMBtu (up US$0.17MMBtu W/W).