The January sales phenomenon -- high volumes moved for reduced prices -- spread to the natural gas trade between Canada and the United States this year, as shown by the latest records kept on the traffic by the National Energy Board (NEB).
Canadian pipeline export deliveries jumped 13.4% to 336.1 Bcf this January from 296.5 Bcf in the first month of 2006. January prices at the international border fell 36.1% to an average US$6.44/MMBtu from $10.07 a year earlier.
The most enthusiastic customers were on the East and West Coasts, where cold snaps sired motivated buyers and falling prices made turning north to Canada easy. January Canadian gas exports to California leaped 36.9% to 47 Bcf from 34.4 Bcf in the first month of 2006. January prices for Canadian deliveries to California were down 36.2% at an average US$6.49/MMBtu from $10.16 a year earlier.
In Alberta, source for four-fifths of Canadian gas supplies, the reason for the big jump in the trade was obvious. Deep, prolonged California cold snaps that also hurt fruit crops, dried up prized winter supplies of oranges and drove up their prices in supermarkets across the province.
During the exceptionally frosty U.S. West Coast winter, January Canadian gas exports to the Pacific Northwest jumped 61.6% to 46.4 Bcf from 28.7 Bcf in the first month of last year. Prices on winter Canadian deliveries to the Pacific Northwest fell 39.1% to US$6.14/MMBtu from $10.07 in January of 2006.
Canadian gas shipments to the northeastern U.S. rose 30% to 128.3 Bcf in January from 98.7 Bcf in the first month of 2006. Regional prices on January Canadian supplies dropped 36.2% to US$6.61/MMBtu from $10.37 a year earlier.
Reversing generally prevailing patterns in the international gas trade, Canadian exports to the midwestern states fell during the first month of this year. January pipeline exports to the Midwest were 113.9 Bcf, off by 14.8% from 133.7 Bcf in the first month of 2006. Midwest prices on January Canadian gas were down by 35.4% at US$6.36/MMBtu from $9.85 a year earlier.
The January sales put a bright face on an otherwise glum first quarter (November through January) of the international gas sales year that ends Oct. 31. The big one-month jumps in volumes staved off outright shrinkage in the traffic. First-quarter Canadian exports finished up four-tenths of one percent at 928.6 Bcf. Average border prices for the three months ended Jan. 31 were off 33.5% at US$7/MMBtu.
Quarterly Canadian pipeline deliveries to California fell 14.3% to 104 Bcf, and prices were down 33.1% at US$6.74/MMBtu. First-quarter export volumes to the U.S. Midwest shrank by 10.2% to 351.4 Bcf, and regional prices on Canadian gas dropped 34.4% to US$7/MMBtu. Canadian shipments to the northeastern U.S. in the first quarter of the current contract year rose 8.2% to 333.1 Bcf while prices dropped 31.6% to US$7.33/MMBtu. Quarterly Canadian exports to the Pacific Northwest rose by 37.1% to 139.1 Bcf, but average prices dropped 35.9% to US$6.45/MMBtu.
Canadian industry analysts, including regulatory authorities, expect the overall gas trade with the U.S. to shrink over the full 2006-07 contract year -- except possibly for spells of weather surprises such as summer heat waves that drive up air conditioning demand for electricity from gas-fired generating stations. Fallen prices, weakened drilling activity and growing gas demand for Alberta oilsands production are forecast to contribute to the long-range drop. Analyst projections show supplies available to the U.S. shrinking by as much as 1 Bcf/d, with reduced drilling and increased domestic Canadian demand each accounting for about half of the erosion.
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