Market Snapshot: Natural gas markets experience significant highs and lows in 2016

Release date: 2017-01-04

In April 2016, benchmark intra-Alberta natural gas prices averaged US$0.88 per million British thermal units (MMBtu) – the lowest monthly price in 20 years. The benchmark gas price at Henry Hub in the U.S. reached an 18-year low of US$1.72 per MMBtu in March 2016. These low prices resulted from high natural gas storage inventories coming out of a relatively warm winter 2015-16. By May 2016, prices had started to increase, but temporarily declined in response to volatile natural gas demand by oil sands operations during the Fort McMurray wildfires.Footnote 1

Natural gas prices began steadily increasing in May. By December, Henry Hub prices had more than doubled from the March low. Intra-Alberta prices increased three-fold between their low in April of US$0.88 per MMBtu and the high for the year in December of US$2.58 per MMBtu. Prices increased primarily in response to U.S. production decreasing for the first time since 2004,Footnote 2 and from U.S. demand reaching record levels during the injection season.Footnote 3 In addition, liquefied natural gas exports from the U.S. Gulf Coast commenced and were ramping up,Footnote 4 and U.S. exports to Mexico were also increasing.

Source and Description

Source: NGX

Description: This line graph illustrates monthly average Henry Hub and intra-Alberta natural gas prices, considered the benchmarks in the U.S. and Canada, between January 2008 and December 2016. Monthly average Henry Hub prices peaked at US$12.55 per MMBtu in June 2008 during the energy commodity price boom of 2008, and declined to an 18-year low of US$1.70 in March 2016. Monthly average intra-Alberta prices peaked at US$10.66 per MMBtu in June 2008 and fell to a low of US$0.88 per MMBtu in April 2016. Prices have increased since then. In December 2016, prices for Henry Hub and intra-Alberta natural gas averaged US$3.58 per MMBtu and US$2.58 per MMBtu, respectively.

Natural gas prices are often affected by natural gas storage levels, with low prices usually a reflection of abundant gas in storage and vice versa. This held true when prices dipped in March and April, but the subsequent price increase occurred despite Canadian gas in storage reaching a record high of 752 Bcf at the start of October, and U.S. gas in storage reaching a record high of 4 047 Bcf on November 11th.

 

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