2017 wasn’t a great year for natural gas pricing in Canada, with AECO prices averaging near $1.70/MMBtu and widening differentials to Henry Hub. Growing production in 2018, limited demand growth, quickly filling pipeline capacity, and strong US competition all placed significant pressure on the Western Canadian gas markets. 2018 isn’t poised to resolve many of these issues either. Despite this, Canadian producers have persevered and continued to grow Western Canadian natural gas production, placing more gas into an already crowded market.
The chart below shows that, while Henry Hub prices have remained relatively stable near $3.00/MMBtu over the past year, the spread to AECO has been growing since early 2017. For the first half of 2017, AECO traded just under $1.00/MMBtu back from Henry. For the second half of the year the spread averaged over $1.60/MMBtu back.