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Storage levels in Alberta near full capacity due to weak

demand

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Western Canadian storage levels 30% higher than three-year

average

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Major producers shut in or delay completing natural gas

wells

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LNG Canada project expected to boost demand in 2025

By Nia Williams

Sept 23 (Reuters) - Canadian natural gas prices slumped

to their lowest level in more than two years on Monday and are

expected to remain under pressure for weeks, as storage levels

in Alberta reach full capacity due to weak demand across North

America.

Next-day gas prices at the AECO hub in

Alberta fell to 5 Canadian cents per million British thermal

units (mmBtu), their lowest level since August 2022, according

to data from financial firm LSEG.

The AECO benchmark has been trending lower throughout 2024

following a mild winter that left Canada, the world's

sixth-largest natural gas producer, with a significant surplus

of supply.

Now summer air conditioning demand is winding down and

storage levels in Alberta are very close to being full, said RBN

Energy analyst Martin King, who warned prices would struggle to

meaningfully recover until colder weather starts to bite in late

October.

"It seems pretty clear we are going to stay weak until we

get a demand pickup because we are running out of places to put

the gas," King said.

Alberta has 504 billion cubic feet (bcf) of natural gas

storage, according to RBN, which is essentially full. British

Columbia and Saskatchewan have a further 80 bcf of capacity, of

which 36 bcf is still available. Overall western Canadian

storage levels are 30% higher than the three-year average for

this time of year.

Months of subdued AECO prices have already prompted a number

of major producers, including ARC Resources ( AETUF ) and

Canadian Natural Resources ( CNQ ), to shut in or delay

completing natural gas wells.

Field receipts showing how much gas producers are putting

onto pipelines systems, a proxy for wellhead production, have

come off in the last three weeks, suggesting even more companies

are responding to low prices by shutting in production, RBN's

King said.

He estimated 700 million to 800 million cubic feet a day of

gas is currently offline, taking production to around 17.3

billion cubic feet a day (bcf/d) this month. Canada's production

year-to-date has averaged 18.1 bcf/d.

Many producers and analysts are looking ahead to the

start-up of the Shell-led LNG Canada project in

northern British Columbia next year as a major new source of 2.1

bcf/d of demand that will help the AECO market recover.

"We are expecting natural gas prices to be pulled higher

over the winter and early 2025 with growing demand from LNG

export capacity increasing," Eight Capital analysts said in a

research note.