Natural gas prices dipped below $1 to perhaps lowest level ever

The Canadian benchmark price for natural gas fell last week to what may be the lowest level ever recorded, says ATB economist Nick Ford.

It fell to around $0.80/MMBtu (AECO spot price).

 ''A big part of the recent reduction in price had to do with sinking demand. Natural gas is required by oil producers for upgrading purposes and to run oilsands operations. Unfortunately, facilities in the Fort McMurray region had to be shut down due to the fires, which caused demand and prices to fall in tandem,'' writes Ford in the financial institution's daily commentary The Owl.

''But it’s not just the situation in Fort McMurray that has affected prices—as prices have been pinned down for awhile. A warmer winter also failed to reduce natural gas inventories which caused gas storage to stay near capacity. All of this has dampened demand for natural gas and kept prices low.''

 Ford says the Canadian benchmark had recovered somewhat by yesterday afternoon and sat around $1.40/MMBtu range. The North American benchmark, Henry Hub, continues to float near $US 2.00 MMBtu.

''Canadian gas is likely to recover somewhat, with AECO Winter 2016/2017 futures at about $2.00/MMBtu. The spread between AECO and Henry Hub pricing is expected to widen further in the coming months, with US benchmark pricing to see the $US 2.85 to 3.00 range,'' he says.