Energy Pricing Information for Canadian Consumers

Natural Gas

Current Market Conditions
October-November 2006

Natural gas prices have continued to decline as the summer months draw to a close and the fall season comes in. Record storage levels continue to keep the market at ease - this could result in further downward pressure on natural gas prices through the fall season as storage continues to fill ahead of schedule.

The high storage levels, and the subsequent decreased need for injections into storage, offset any demand that the record-breaking hot weather provided, and has enabled an above average gas surplus going into the fall of this year. In addition, natural gas prices remain substantially disconnected from its traditional pricing relationship with crude oil; meaning that high crude oil prices are not significantly supporting natural gas prices.

The speculation surrounding the denouement of the 2006 hurricane season may contribute to some price volatility until the season ends in November as named storms continue to appear. However, the expectation is that the storms will continue to bypass the producing U.S. Gulf region, and that the high storage levels should dampen the effect of any sudden bursts of natural gas demand prior to the winter heating season.

Parts of Canada and the U.S. are forecasted to experience above-normal temperatures for the next couple of months. The fall period is typically a time to help fill storage as the power generation demand of the summer tapers off and the demand of the winter heating season is anticipated. The typical heating season, which means higher gas demand, commences in mid-late November. If temperatures are above normal, a late start to the heating season is possible. However, as soon as some weather-related heating demand comes in there will be some price support provided to the natural gas market. Ultimately, this weather outlook, when combined with the current storage conditions, should not provide substantial support for natural gas prices in the short-term.

Temperature Outlook - October-November 2006

September 2006
Sources: Environment Canada, NOAA (U.S.)

Listed below are the main factors that have an impact on natural gas prices at this time of year. The arrow indicates upward or downward pressure on price or in the case of a horizontal arrow, uncertainty. Overall, it is expected that high storage levels will keep natural gas prices around current levels, with little expectation that there will be any weather-related demand surges in the next couple of months.

Price Pressures

Weather
Gas storage levels higher than normal
Crude oil price

For further electricity pricing data and information, please see our Helpful Links section. The following natural gas sections are also available: How Markets Work, Canadian Industry and FAQs.

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