CIBC on NG EQUITY RESEARCH
May 30, 2024 Industry Update
Natural Gas Guide: Production Out Of The U.S. Pushing Higher
Hot Weather In India Has Increased Demand For Natural Gas
A Few Things We Are Watching
Flows out of Westgate dropped sharply ahead of a planned outage on
the system: Volumes out of the West Gate have dropped by 0.6 Bcf/d over
the past 10 days to 1.9 Bcf/d, and we do not expect a sustainable recovery in
volumes until late June. Western Canadian field receipts increased by 0.2
Bcf/d to 17.6 Bcf/d, while demand increased to 7.0 Bcf/d. Western Canadian
storage increased by 10 Bcf to 575 Bcf, which is 152 Bcf above the five-year
average. NYMEX closed Wednesday at US$2.29/MMBtu (down US$0.22
W/W). The AECO basis narrowed to US$1.38/MMBtu below NYMEX (-
US$1.52/MMBtu last week) and the Station 2 basis narrowed to
US$1.59/MMBtu below NYMEX (-US$1.86/MMBtu last week).
U.S. natural gas inventories increased more than expected as supply
has started to slowly ramp up: According to Platts, U.S. dry gas production
averaged 100.1 Bcf/d last week, which is 0.3 Bcf/d above the week prior.
Concurrent with recent increases in the price of natural gas, production has
increased to above 101.0 Bcf/d. EQT 1.0 Bcf/d production curtailment ends
in May, and it remains to be seen whether the company will bring back the
curtailed production or not. Tellurian, the developer of the Driftwood LNG
project, announced the sale of its upstream assets to Aethon Energy
Management for total proceeds of US$260MM along with a Heads of
Agreement for Aethon to purchase two MMTPA from the Driftwood LNG
project. The announcement will help Tellurian to advance the Driftwood LNG
project towards final investment decision. U.S. gas in storage increased by
84 Bcf last week, above consensus expectations for a 77 Bcf build. At 2,795
Bcf, stocks were 380 Bcf above the same period in 2023 and 586 Bcf above
the five-year average.
India’s power demand hitting all-time high: According to Bloomberg, hot
weather in India has promoted reactivation of some idle gas-fired power
plants and increased the demand for natural gas in the country by as much
as 12% versus last year. According to Reuters, a joint venture between
India’s Adani Group and Total Energies is reviewing a plan to double the
regasification capacity of its Dhamra LNG terminal in Eastern India. Reuters
also reported that Germany and the Czech Republic are pushing the
European Union to fully ban imports of gas from Russia. Depending on the
timeline, a full ban on imports of natural gas from Russia by the European
Union could result in another price rally in European natural gas benchmark.
European inventories increased by 65 Bcf to reach 2,660 Bcf, narrowing the
surplus over the five-year average to 557 Bcf. NBP closed Wednesday at
US$10.24/MMBtu (up US$0.32/MMBtu W/W), while Netherlands TTF closed
at US$10.73/MMBtu (down US$0.10/MMBtu W/W)