CIBC Notes EQUITY RESEARCH
December 14, 2023 Industry Update
Natural Gas Guide: LNG Canada Plans Startup Activities In 2024
Flow Of Feedgas To U.S. LNG Facilities Reached All-time High
A Few Things We Are Watching
LNG Canada year-end update indicates startup activities in 2024. The
company indicated that all 215 modules required for the facility are installed
and the project is 85% complete. Ramp-up activities will take more than a
year, which implies the facility should load its first LNG cargos in 2025.
Western Canadian field receipts crossed a new milestone, averaging 18.0
Bcf/d for the week while demand decreased by 0.2 Bcf/d to 8.7 Bcf/d.
Western Canadian storage declined by 8 Bcf to 489 Bcf, which sits 111 Bcf
above the five-year average. NYMEX closed Wednesday at US$2.38/MMBtu
(-US$0.38 W/W). AECO basis narrowed to US$1.08/MMBtu below NYMEX
(-US$1.12/MMBtu last week), and Station 2 basis narrowed to
US$1.41/MMBtu below NYMEX (-US$1.43/MMBtu last week).
Warm weather pushes NYMEX to six-month low amidst record
production. Recent weather forecasts suggest that above-average
temperatures will persist for the balance of December. Warm weather
coupled with surging production and above-average inventory levels have
put downward pressure on prices, which is partially offset by all-time high
LNG feedgas demand, exceeding 15 Bcf/d on Sunday. With delays in the
startup of Golden Pass LNG we expect the supply and demand imbalance to
continue into 2024 and drive a widening surplus to the 5-year average
storage trend. U.S. gas in storage decreased by 55 Bcf last week, in line with
consensus expectations for a 56 Bcf draw. At 3,664 Bcf, stocks were 245 Bcf
above the same period in 2022 and 260 Bcf above the five-year average.
Emerging buyers show up in Asian LNG market amidst falling prices.
According to Bloomberg, buyers from Thailand and India have secured LNG
cargoes for delivery in January and February as prices in North Asia hit the
lowest levels since late September. Above-average inventories and a weak
demand outlook due to warm temperatures have put downward pressure on
JKM, allowing price-sensitive customers to enter the market. European
inventories decreased by 122 Bcf to reach 3,529 Bcf, narrowing the surplus
over the five-year average by 17 Bcf, to 380 Bcf. NBP closed Wednesday at
US$10.30/MMBtu (down US$1.23/MMBtu W/W), while Netherlands TTF
closed at US$11.20/MMBtu (down US$1.10/MMBtu W/W). JKM closed at
US$15.46/MMBtu (down US$0.55MMBtu W/W).