KWK Covered to soon?
Higher Canadian Natural Gas Inventory To Soften Prices
CALGARY -- Canadian natural gas storage levels could be much higher than reported, bringing prices down to C$1.75 a million cubic feet within weeks, according to a Calgary analyst.
A 63-billion-cubic-foot gap between Canadian Gas Association, or CGA, data and information compiled from major pipelines out of Western Canada - the nation's main producing region - implies a sharper downturn in pricing until heating season begins, Martin King, analyst with FirstEnergy Capital Corp. said Friday.
"That will help it come up to some degree and certainly stop prices from dropping further, once we get that nice little demand swing in Canada when it gets cold," King said.
He expects natural gas prices to gain momentum in November, and creep back to C$2.45/MMcf by the end of the year.
Natural gas prices have fallen almost 80% since the beginning of the year, with Alberta's benchmark AECO-C Hub prices dropping more than 40% in the past two months.
Mild weather, a drop in consumption of natural gas, and a faltering North American economy have all contributed to the trend that is expected to start tapering off in the first quarter of 2002.
CGA data released Friday indicated Canadian natural gas storage inventories were 78% full, at 446.5 Bcf, data FirstEnergy challenges when comparing information obtained from Western Canadian pipeline operators TransCanada PipeLines Inc.'s, (TRP T.TRP) Alberta system, Westcoast Energy Inc. (T.W) in British Columbia, and TransGas in Saskatchewan.
Alliance Pipeline, which ships 1.2 Bcf a day to Chicago from Canada, doesn't account for producer injections into storage along the way.
The discrepancies in CGA and pipeline data for the West appear to stem from processing methods used by the association, King said.
The CGA doesn't include the 48-Bcf January Creek facility, reportedly at 90% capacity. Conversely, the association continues to include the 35 Bcf-capacity Aitken Creek facility's working gas capacity in the amount of available storage in Western Canada, but hasn't covered the facility's storage data since May or June.
"It just seemed a bit odd to us that that information hadn't changed," King said.
Adding the CGA and pipeline data together also implies an injection rate this year of about 1 Bcf a day, or 400 Mcf a day above previous estimates.
Higher injection rates point to storage filling sooner, and natural gas flooding the market in search for a home until the traditional heating-storage withdrawal season begins Nov. 1.
However, storage operations and utilities are contractually obliged to start withdrawing inventories on that date, easing the downward pressure on prices. |
