The last time a candy bar cost a nickel was in 1947. And that was after the government lifted war-time price controls.But that was the price per gigajoule of clean-burning Alberta natural gas this weekend.Next-day spot prices at the AECO hub in Alberta fell to just 5 cents per million British thermal units (mmBtu), the lowest since August 2022.The AECO benchmark — which is the clearing house for natural gas produced in Alberta — has been trending lower through the year following a mild winter that left Canada with a growing surplus.By Wednesday they’d recovered to about two bits — which still won’t get you a pack of gum..By comparison, US Henry Hub prices in Louisiana were about USD$2.86 per mmBtu, which speaks to a lack of pipeline export capacity out of Canada.Analysts said it’s all part of the usual cycles of supply and demand which have proven more volatile this year.With the cooler weather, air conditioning demand has fallen off ahead of the winter heating season.The gas that does come out of the ground, goes into bulging storage tanks where it’s held in reserve. In fact, Alberta has 504 billion cubic feet (bcf) of gas storage, which is essentially full. British Columbia and Saskatchewan have a further 80 bcf of capacity, of which 36 bcf is available. Overall western Canadian storage levels are about 30% higher than the three-year average for this time of year.That’s led big gas producers like Canadian Natural Resources and ARC Resources to shut in gas production and delay drilling new wells until prices recover.Canada, which is the world’s sixth-largest producer, has averaged 18.1 bcf/d thus far this year. Some estimates, as per Reuters, suggest almost 800 million cubic feet per day has been curtailed. At some point, it’s cheaper just to leave it in the ground..It’s bad news for the Alberta government, which is banking on a price of about $2.20 to generate about $1.5 billion in royalties in the 2024-25 fiscal year.But it’s good news for oil producers that use natural gas as an input to generate steam in thermal bitumen operations. Oil sands and heavy oil generated about $18.5 billion last year.Still, analysts said they don’t expect prices to pick up significantly until the LNG Canada project comes on stream later this year, sucking up about 2.1 bcf/d of surplus capacity.“We are expecting natural gas prices to be pulled higher over the winter and early 2025 with growing demand from LNG export capacity increasing,” wrote Eight Capital analysts, in a research note.
The last time a candy bar cost a nickel was in 1947. And that was after the government lifted war-time price controls.But that was the price per gigajoule of clean-burning Alberta natural gas this weekend.Next-day spot prices at the AECO hub in Alberta fell to just 5 cents per million British thermal units (mmBtu), the lowest since August 2022.The AECO benchmark — which is the clearing house for natural gas produced in Alberta — has been trending lower through the year following a mild winter that left Canada with a growing surplus.By Wednesday they’d recovered to about two bits — which still won’t get you a pack of gum..By comparison, US Henry Hub prices in Louisiana were about USD$2.86 per mmBtu, which speaks to a lack of pipeline export capacity out of Canada.Analysts said it’s all part of the usual cycles of supply and demand which have proven more volatile this year.With the cooler weather, air conditioning demand has fallen off ahead of the winter heating season.The gas that does come out of the ground, goes into bulging storage tanks where it’s held in reserve. In fact, Alberta has 504 billion cubic feet (bcf) of gas storage, which is essentially full. British Columbia and Saskatchewan have a further 80 bcf of capacity, of which 36 bcf is available. Overall western Canadian storage levels are about 30% higher than the three-year average for this time of year.That’s led big gas producers like Canadian Natural Resources and ARC Resources to shut in gas production and delay drilling new wells until prices recover.Canada, which is the world’s sixth-largest producer, has averaged 18.1 bcf/d thus far this year. Some estimates, as per Reuters, suggest almost 800 million cubic feet per day has been curtailed. At some point, it’s cheaper just to leave it in the ground..It’s bad news for the Alberta government, which is banking on a price of about $2.20 to generate about $1.5 billion in royalties in the 2024-25 fiscal year.But it’s good news for oil producers that use natural gas as an input to generate steam in thermal bitumen operations. Oil sands and heavy oil generated about $18.5 billion last year.Still, analysts said they don’t expect prices to pick up significantly until the LNG Canada project comes on stream later this year, sucking up about 2.1 bcf/d of surplus capacity.“We are expecting natural gas prices to be pulled higher over the winter and early 2025 with growing demand from LNG export capacity increasing,” wrote Eight Capital analysts, in a research note.
