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Market Snapshot: Abundant natural gas storage due to warm winter
Release date: 2016-04-14
Because natural gas production is relatively steady while gas demand fluctuates with the seasons, storage is used to help balance natural gas markets. Unexpected variations in demand are usually reflected in storage volumes and, ultimately, in natural gas prices.
During winter 2015/16, temperatures in most regions of Canada and the U.S. were above normal, resulting in lower space heating demand for natural gas. This led to a storage balance in Canada of 519 billion cubic feet (Bcf) at the beginning of the 2016 injection seasonFootnote 1 — more than double the volume of gas in storage on 1 April 2015 (253 Bcf) and 85 per cent above the five-year average (2011-2015). For most of 2016, natural gas storage levels in Canada have been above the five-year average.
Figure Source and Description
Description: This graph shows the five-year range, the five-year average and actual Canadian natural gas storage volumes from January 2013 to the end of March 2016. It illustrates the seasonal fluctuations in storage volumes over the injection season and the withdrawal season. Storage typically bottoms out around 150 Bcf to 200 Bcf in April, at the end of the withdrawal season. Storage typically peaks in October around 700 Bcf, at the start of the withdrawal season. Over winter 2015/16, natural gas storage in Canada generally remained above the five-year average and range and started the 2016 injection season at 519 Bcf.
The abundance of natural gas in storage had a direct effect on prices, with the intra-Alberta price for natural gas falling from $2.36 per gigajoule on 1 November 2015 to a low of $0.91 per gigajoule on 6 April 2016.
Natural gas storage in the U.S. followed a similar pattern to Canada over winter 2015/16. In November 2015, the U.S. Energy Information Administration reported that U.S. gas storage hit a record high, surpassing four trillion cubic feet (Tcf). At the end of the withdrawal season, U.S. storage volumes were at 2.5 Tcf, 54 per cent above the five-year average (2011-2015). U.S. natural gas prices have also remained low. Prices at Henry Hub stayed below US$3.00 per million British thermal units (MMBtu) for the entire heating season, and as of 6 April 2016 were reported at US$1.86 per MMBtu.
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