Firming natural gas prices of late in the U.S. are not translating to as much of an increase for Canadian natural gas prices, meaning that the basis – or price discount – for benchmark AECO prices has been widening (i.e., becoming a greater discount). When considering the basis for the prompt month AECO contract price versus prompt month NYMEX-CME natural gas contract price, the discount has shifted from $(0.70)/MMBtu at start of June to near $(1.20)/MMBtu in recent days (blue dashed circle in top chart), meaning that Canadian gas is relatively cheaper by about $0.50/MMBtu than it was just a few weeks ago.
Relatively cheaper gas has been spurring more exports of Canadian gas to the U.S., with gross exports having risen from the 7.5 Bcf/d range at the start of June to above 9 Bcf/d in the past few days (green dashed circle, bottom chart). With U.S. demand stronger on gas burn for power generation, especially in the northern tier states where Canadian gas can make a difference in balancing U.S. regional markets, we expect that recently elevated levels of exports can be maintained well into July and possibly August. These elevated exports should provide at least some small relief for oversupplied gas markets in Western Canada.
Read More: A Widening AECO Price Discount is Spurring Additional Canadian Natural Gas