EQUITY RESEARCH
August 15, 2024 Industry Update
Natural Gas Guide: Easing Panama Canal
Restrictions Could Improve Global LNG
Trade Flow
U.S. Storage Reports A Rare Summer Draw
A Few Things We Are Watching
Sidelined natural gas production in Western Canada could be restored
heading into year end but will remain price dependent. Western
Canadian field receipts and demand stayed flat week over week, averaging
17.2 Bcf/d and 7.0 Bcf/d, respectively. We estimate Western Canadian
storage increased by 10 Bcf to 680 Bcf, which is 153 Bcf above the five-year
average. Several Canadian gas-weighted producers have curtailed volumes
or deferred the on-stream timing of gas wells into late 2024 or 2025 in
anticipation of a better pricing environment. We therefore expect a relatively
flat production profile in Q3/24 versus Q2/24, with production volumes likely
to be restored later in the year. NYMEX closed Wednesday at
US$2.18/MMBtu (up US$0.21 W/W). The AECO basis to NYMEX widened to
-US$1.66/MMBtu (-US$1.40/MMBtu last week) and the Station 2 basis to
NYMEX widened to -US$1.77/MMBtu (-US$1.43/MMBtu last week).
Waha pricing remains under pressure as Matterhorn Express in-service
date appears to be slightly delayed. According to Platts, U.S. dry gas
production averaged 102.2 Bcf/d, which is 0.8 Bcf/d lower week over week.
Permian production currently hovers around 19 Bcf/d, which is close to a year-
to-date high, while Waha pricing is negative as gas takeaway capacity for
Permian producers remains constrained. Start-up of the 2.5 Bcf/d Matterhorn
gas pipeline in the Permian appears to have been delayed to late Q3/24. U.S.
gas in storage decreased by 6 Bcf last week, which was below consensus
expectations for a 3 Bcf build. At 3,264 Bcf, stocks were 209 Bcf above the
same period in 2023 and 375 Bcf above the five-year average.
LNG cargo deliveries from the U.S. to Asia are expected to increase as
some restrictions in the Panama Canal eased. According to Platts, the
Panama Canal Authority (APC), has eased some restrictions due to
increasing water levels at Gatun Lake. This should allow for additional LNG
cargoes to cross the canal destined for Asia. The Panama Canal is the
preferred route of delivery for LNG cargoes from the U.S. to Asia due to its
proximity. While European inventories are above historical averages,
European buyers are expected to increase their procurement activities over
the coming months to secure additional LNG volumes ahead of winter amidst
the ongoing war between Russia and Ukraine. The easing of restrictions at
the Panama Canal will increase competitive tension between European and
Asian buyers which may put upward pressure on global LNG prices.
European inventories increased by 65 Bcf to reach 3,406 Bcf, narrowing the
surplus over the five-year average by 21 Bcf to 385 Bcf. NBP closed
Wednesday at US$10.14/MMBtu (up US$0.06/MMBtu W/W), while
Netherlands TTF closed at US$12.30/MMBtu (up US$0.34/MMBtu W/W) and
JKM increased to US$12.72/MMBtu (up US$0.18/MMBtu W/W).