Kevin Dobbs

Enbridge Inc. said late Wednesday it planned to sell its stakes in the Alliance Pipeline and the Aux Sable natural gas liquids processing facility in the United States to Pembina Pipeline Corp. for more than US$2 billion.

Producers and others along the natural gas value chain are apprehensive about the substantial shift in trading momentum this year, but the sector’s price slump is playing an outsized role in drawing down inflation and easing recession worries.

Surging production and new takeaway capacity paved a path for record-high natural gas supplies flowing from the prolific Permian Basin.

The heating season has arrived and utilities are drawing substantially more natural gas from storage to get furnaces cranking. But prices remain subdued. What gives?

Natural gas production in the Rockies, like the country overall, is at vigorous levels this fall even as demand from western markets eases. The result: stout supplies in storage and soft prices.

OPEC-plus, the consortium of major oil producers led by Saudi Arabia, agreed to a substantial production cut late last week that could bolster prices and fuel more demand for Permian Basin crude. This, by extension, could drive continued lofty levels of associated natural gas from the prolific basin.

Natural gas cash prices spiked early in the past week amid a blast of frigid air. But milder temperatures settled in during the weekly trading period and strong production pushed the physical market into negative territory.

Interruptions imposed by western wildfires last summer aside, natural gas production in Canada has often averaged around 18 Bcf/d or higher in 2023. That’s roughly 1 Bcf/d more than the 2022 standard, according to Canada Energy Regulator data, and it comes at a time when demand has largely held flat amid mild weather.

Record-warm ocean surface temperatures fueled above-average activity during the 2023 Atlantic hurricane season. Still, the storms steered clear of the U.S. energy complex and made no lasting impact on natural gas production or prices.

The combination of relatively soft weather-driven demand and record production put the U.S. natural gas market on a path to price-pressuring oversupply well into 2024, a growing chorus of analysts cautioned in November.