A year of gas pains

It was a year to forget for Canadian natural gas producers, as well completions fell 59%. The number of active rigs declined 14% last year, compared to a 2% rise in the United States, which is in the midst of a natural-gas and oil boom. “Western Canadian gas supply averaged 13.5 billion cubic feet per day through the year, down 845 mmcf/d from 2011 (5.9%),” Martin King, an analyst at First Energy Capital, said in a note. “We believe that Western Canadian Sedimentary Basin gas supply will continue to fall in 2013, and we are forecasting a year-over-year decline of 1 bcfd for the year.” Alberta natural gas price benchmark AECO was down 35% for the year, and 15% below the U.S. Henry Hub spot gas prices, as the North American gas glut continues to weaken prices. Even though it’s early days, 2013 has done little to inspire confidence, as prices crashed on New Year’s Day in thin trading. “That drop in overnight trading spooked the market,” Teri Viswanath, director of commodities strategy at BNP Paribas SA, told Bloomberg. Gas futures have plummeted 18% since rising to a one-year intraday high of $3.933 on Nov. 23 on below-average weekly stockpile declines caused by mild weather. Still, some analysts expect a recovery in U.S. natural gas prices, which could lift Canadian prices as well. Capital Economics estimates show Henry Hub prices to average US$3.75 per million British thermal units, rising to US$4 by the second quarter.