Natural Gas Prices Rebound; Heavy Differential Widens In November

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Beleaguered natural gas producers finally saw relief in November as AECO spot prices gained nearly $1.27/gigajoule, climbing to an average of $2.19/gigajoule from 92 cents/gigajoule in October.

On the oil side, Net Energy Inc. prices strengthened across the board although the heavy-light differential widened in response to the shutdown of TransCanada Corporation’s Keystone pipeline following a spill in South Dakota.

Natural gas prices

While the higher price likely reflects the arrival of colder weather, November was also the first month for TransCanada’s new Long Term Fixed Price service on the Canadian Mainline from Empress, Alta. to Dawn, Ont. which moves an additional 1.4 bcf per day of gas out of Western Canada.

November AECO prices were at their highest level since June when gas averaged $2.39/gigajoule although prices were still 17 per cent below the November 2016 average of $2.65/gigajoule. Year-to-date, AECO prices are up just over six per cent to $2.08/gigajoule from $1.96/gigajoule in the first 11 months of 2016.

On the natural gas futures market, New York Mercantile Exchange (NYMEX) gas fetched an average of US$3.05/mmBtu, up 4.8 per cent from $2.91/mmBtu in October and up about six per cent from $2.88/mmBtu a year earlier. Year-to-date, NYMEX gas has averaged $3.03/mmBtu, an increase of more than 22 per cent from $2.47/mmBtu in the comparable 2016 period.


Oil prices up across the board

Net Energy Western Canadian Select (WCS) gained four per cent for the month, increasing to US$41.35/bbl from $39.76/bbl in October, while year-over-year, WCS was up nearly 35 per cent from $30.63/bbl in November 2016.

Averaging $55.31/bbl in November, Net Energy Sweet gained $5/bbl, climbing 9.93 per cent from $50.31/bbl the previous month, and was up about 32 per cent from $41.78/bbl a year earlier.

The light-heavy differential, though, widened in November to $13.96/bbl from $10.55/bbl in October. The November differential was the widest since April 2014 when heavy producers saw a $14.29/bbl discount. Year-to-date, the differential has averaged $9.42/bbl versus $10.61/bbl in 2016.

Net Energy Syncrude rose nearly seven per cent to $58.66/bbl from $54.94/bbl and was up nearly 34 per cent from $43.89/bbl in November 2017. Year-to-date, the synthetic crude has averaged $51.75/bbl, an increase of more than 19 per cent, from $43.37/bbl over the same period last year.