Bloomberg News

Canada Natural Gas Rises as Heat Returns to U.S. East, Midwest

July 11, 2012

Canadian natural gas rose as U.S. forecasters predicted hotter weather, signaling more demand for fuel to run air conditioners.

August gas in Alberta advanced 3.9 percent, nearly recouping yesterday’s 4.2 percent loss, as MDA EarthSat Weather of Gaithersburg, Maryland, predicted temperatures would increase in the U.S. Midwest and Northeast next week.

“Strong demand from the heat, a continuously improving storage picture and reduced drilling bodes well,” Peter Linder, president of the DeltaOne Energy Fund in Calgary, said in a telephone interview. “I expect gas prices to rise slowly but steadily through summer and I expect to see $3.25 or even $3.50 gas come Nov. 11” on the New York Mercantile Exchange.

Alberta gas for August delivery increased 8.5 cents to C$2.27 per gigajoule ($2.10 per million British thermal units) as of 3:30 p.m. New York time on NGX, a Canadian Internet market. Gas traded on the exchange is shipped to users in Canada and the U.S. and priced on TransCanada Corp. (TRP)’s Alberta system.

Alberta gas has fallen 12 percent this year, from C$2.58 on Dec. 31, and risen 40 percent from C$1.625 at the end of March.

Natural gas for August delivery on the New York Mercantile Exchange gained 11.6 cents to settle at $2.853 per million Btu.

Hotter Weather

“A strong upper-level ridge overhead and westerly flow at the surface will combine to produce this next round of heat, which should peak around midweek,” MDA said in a forecast today for July 16-20. “The Midwest will also see plenty of heat,” especially Tuesday to Wednesday, when upper 90s are expected in Chicago.

The high in Chicago on July 17 may be 98 degrees Fahrenheit (37 Celsius), according to MDA EarthSat. New York may reach 95 that day.

Spot gas at the Alliance delivery point near Chicago dropped 7.82 cents, or 2.7 percent, to $2.8386 per million Btu on the Intercontinental Exchange. Alliance is an express line that can carry 1.5 billion cubic feet a day from western Canada.

At the Kingsgate point on the border of Idaho and British Columbia, gas fell 7.64 cents, or 2.9 percent, to $2.53 per million Btu. At Malin, Oregon, where Canadian gas is traded for California markets, prices advanced 11.9 cents, or 4.3 percent, to $2.6388.

Volume on TransCanada’s Alberta system, which collects the output of most of the nation’s gas wells, was 16.6 billion cubic feet at 2:30 p.m. Gas was flowing at a daily rate of 1.9 billion cubic feet at Empress, Alberta, where the fuel is transferred to TransCanada’s main Line.

Flow Rate

At McNeil, Saskatchewan, where gas is transferred to the Northern Border Pipeline for shipment to the Chicago area, the daily flow rate was 2.06 billion cubic feet.

The available capacity on TransCanada’s British Columbia system at Kingsgate was 745 million cubic feet. The system was forecast to carry 1.87 billion cubic feet today, or 71 percent of normal capacity of 2.62 billion.

The volume on Spectra Energy’s British Columbia system, which gathers the fuel in northeastern British Columbia for delivery to Vancouver and the Pacific Northwest, totaled 2.73 billion cubic feet at 2:50 p.m.

To contact the reporter on this story: Colin McClelland in Toronto at cmcclelland1@bloomberg.net

To contact the editor responsible for this story: Dan Stets at dstets@bloomberg.net


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