Its winter again and Canadians heating their homes with natural gas should expect to spend slightly more this year than they did last year. On the other side consumers of electricity and heating oil are not likely to experience any sizeable increase.
The rise in demand for natural gas or during winter months is primarily driven by one key variable, the weather. Heating demand necessities usually should be average to below-average, based on normal temperature expectations in Canada, with varying temperature forecast for the West and East Coast. Below-normal temperatures for the West Coast and above-normal temperatures for the East Coast.
Prices are usually forecasted to average between $2.90 – $3.40 per Gigajoule at Alberta and US$3.25 – $3.75 per million British Thermal Units (MMBtu) at Henry Hub. This is a slight increase from last winter’s prices. In Ontario, prices are expected to be comparable to last winter, averaging between US$3.40 – $3.90 per MMBtu.
Canadians using heating oil to heat their homes this winter should expect to pay between $1.10 and $1.30 per litre, or about the same as last winter. This is due to the fact that the largest heating oil markets are on the east coast, the major factor affecting heating oil prices is the price of seaborne crude oil which is also expected to be similar to last winter.
Also, ongoing geopolitical tensions in the Middle East and North Africa could impact the supply of crude oil, which could have an adverse effect in price fluctuations. Inventory levels of crude oil and petroleum products in the U.S., Europe and Japan are near 20-year lows. Such low inventories could translate to increased price volatility in the presence of supply interruptions or refinery outages or strikes.
Stability in crude oil price forecasts and consistent inventories of gasoline both suggest that Canadians will not pay much more than they did last year when filling up at the pump. The retail price for a litre of gasoline in Canada is forecast to be in the region of $1.15 and $1.35.
Alberta and Ontario wholesale electricity prices are forecast to remain close to last year’s winter levels. Prices in Alberta are expected to average between $80 and $90 per MW.h over the winter months. Residential electricity rates have been on the increase somewhat in almost all provinces in 2013 and further price increases are scheduled for 2014. This is attributed to the need to replace aging infrastructure and also the cost of new generation put upward pressure on electricity prices in Canada.
This forecast that propane prices this winter will be at a level similar to that of last year, ranging from 25 – 35 cents per litre. The increase in propane prices in comparison to last winter is primarily driven by higher WTI (West Texas Intermediate) prices this year.
Propane stocks in Canada and the U.S. were high as indicated at the end of October, as propane production in south of the border continues to grow, which is supported by rising production of liquids-rich shale gas. Though U.S. propane exports are on the increase due to the growth in U.S. supply and higher overseas propane prices versus the U.S., this likely indicates that propane stocks in North America are sufficient to cover the expected incremental winter demand.
The NEB which is the independent federal regulator of key areas of Canada’s energy industry. Part of its objectives and goals is to regulate pipelines, trade and energy development where necessary in the Canadian public interest. NEB also monitors the supply of all energy commodities in Canada.