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Winter Storms Lifted 1Q Gas Prices at U.S.-Canada Border

Canadian and U.S. dealers alike dined out on the storms that made the start of 2014 the harshest heating season in memory, according to the latest natural gas trade scorecard of the U.S. Department of Energy (DOE).

Prices about doubled at the border for gas moving in both directions between Canada and the United States as winter cold fronts swept down out of the northwest and across the continent during the opening three months of this year.

First quarter 2014 average prices for U.S. pipeline exports to Canada jumped to US$9.23/MMBtu, up 123% from US$4.13/MMBtu in the last three months of 2013, according to DOE. The value of Canadian pipeline exports rose to US$7.75/MMBtu in first quarter 2014, up 98% from US$3.92/MMBtu in the last quarter of 2013.

"This extreme price increase is attributed to the severe winter weather in the U.S. Northeast and Midwest," said DOE.

U.S. exports go to Canada's highest-priced markets in Ontario and Quebec. The average value of Canadian exports is invariably lower because they go to an array of destinations across the continent from Los Angeles to New York City.

The winter storms -- dubbed polar vortexes this year, and known as Alberta clippers to previous less science-minded generations -- also increased gas traffic volumes in both directions, north and south, across the Canada-U.S. border.

First quarter 2014 Canadian pipeline deliveries into the U.S. rose to 779 Bcf, up by 7% from 725 Bcf in the last three months of 2013.

U.S. pipeline shipments into Canada climbed to 258 Bcf in the first three months of this year, up by 27% from 202 Bcf during fourth quarter 2013.

The cold heating season also all but arrested longer-term slippage in U.S. exports to Canada. Erosion set in during mid-2013 after the National Energy Board (NEB) changed the competitive landscape by ordering TransCanada Corp. to lower tolls on its Mainline from Alberta to Ontario, Quebec and export border crossings into the United States.

The market is poised to change again under an agreement to increase Canadian pipeline import capacity between TransCanada and the country's biggest distributors: Union Gas (Spectra) in southern Ontario, Enbridge Gas in Toronto and Gaz Metro in Quebec. The deal is advancing towards approval through a contested case before the NEB.

In year-to-date trade comparisons, the first-quarter 2014 U.S. pipeline shipments to Canada of 258 Bcf were only down by a marginal 6% from the first three months of 2013, when northbound U.S. exports were 275 Bcf.

The harsh winter also gave Canadian gas dealers their strongest lift in sales volumes in about six years. The 779 Bcf of Canadian pipeline exports in 1Q2014 was up by 4% from 750 Bcf in the January-March period of 2013.

Quarterly average prices were up sharply on the trade scorecard's year-to-year comparisons.

The US$9.23/MMBtu fetched by U.S. pipeline deliveries to Canada in first quarter 2014 was a 129% gain from US$4.02/MMBtu in the first three months of 2013.

The US$7.75 average for Canadian pipeline exports to the U.S. in first quarter 2014 was a jump of 102% from US$3.83 in the same period of 2013.

The gas trade action was far less dramatic at the southern end of the continent, on the border between Mexico and the United States. U.S. pipeline exports to Mexico rose by 1% to 162 Bcf in first quarter 2014 from 160 Bcf in the same period of 2013.

Prices fetched by U.S. gas at the Mexican border gained 47% to US$5.35/MMBtu in first quarter 2014 compared to the average US$3.63/MMBtu a year earlier.

Mexican pipeline exports to the U.S. rose to 0.4 Bcf in first quarter 2014 from virtually zero a year earlier. Mexican production fetched US$3.92/MMBtu in first quarter 2014, up from US$2.43/MMBtu in the first three months of 2013.

Traffic on highways, in truckloads of U.S.-sourced liquefied natural gas (LNG) and compressed natural gas (CNG), was tiny compared to pipeline deliveries but big enough to show up on the DOE's latest trade scorecard.

U.S. truckers delivered 0.1 Bcf of gas to Canada for US$19.50/MMBtu in first quarter 2014, and another 0.1 Bcf to Mexico for US$13.49/MMBtu.

The overseas trade in LNG remained modest. Ocean tanker deliveries to the U.S. fell by 55% in first quarter 2014 to 15 Bcf from 33 Bcf a year earlier, but quarterly average prices rose by 40% to US$7.93/MMBtu from US$5.64/MMBtu.

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