Canadian Natural Gas Follows U.S. Market Lower on Mild Weather

Canadian natural gas dropped, following the U.S. market lower on mild weather and after prices failed to break through a technical price level.

The front-month gas contract in Alberta declined 4.8 percent after rising on Oct. 19 to its highest level since Nov. 10. Gas on the New York Mercantile Exchange dropped after traders failed to break above $3.65 per million British thermal units, and as weather reports showed mild weather.

“On Friday, the price action tested the $3.65 level twice and couldn’t get through, and then we saw a test of that level again in pre-market trading today and also couldn’t get above that,” said Aaron Calder, senior market analyst at Gelber & Associates in Houston. Failing to break through that level allowed short-sellers to take prices lower, he said.

Alberta gas for November delivery tumbled 15.75 cents to C$3.13 per gigajoule ($2.99 per million British thermal units) at 2:15 p.m. New York time on the NGX, a Canadian electronic exchange.

Natural gas for November delivery on the New York Mercantile Exchange fell 15.7 cents, or 4.3 percent, to $3.46 per million Btu.

Weather will be mixed across North America this week, with hot weather dominating the central and eastern U.S., until a cold front in western Canada reaches the Midwest this weekend, according to MDA EarthSat Weather of Gaithersburg, Maryland. U.S. heating demand will be 31 percent below normal this week, Weather Derivatives of Belton, Missouri, said.

Alberta Weather

Cold weather over the next week in Alberta will lend support to Canadian gas prices, said Peter Linder. president of the DeltaOne Energy Fund in Calgary. “Gas consumption in this province will be very high for October,” he said. “Clearly demand is here.”

Volume on TransCanada’s Alberta system, which collects the output from most of Canada’s gas wells, was 16.2 billion cubic feet at 1:30 p.m. New York time.

Gas was flowing at a daily rate of 1.86 billion cubic feet at Empress, Alberta, where the fuel is transferred to TransCanada’s main Line.

At McNeil, Saskatchewan, where gas is transferred to the Northern Border Pipeline for shipment to the Chicago area, the rate was 2.01 billion cubic feet.

TransCanada’s British Columbia system at Kingsgate had 307 million cubic feet per day of available capacity. The system was forecast to carry 1.36 billion cubic feet today, 82 percent of estimated capacity.

The volume on Spectra Energy Corp.’s British Columbia system, which gathers the fuel in northeastern British Columbia for delivery to Vancouver and the Pacific Northwest, totaled 2.85 billion cubic feet at 1:20 p.m.

To contact the reporter on this story: Edward Welsch in Calgary at ewelsch1@bloomberg.net

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

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