By Amanda Stephenson and Scott DiSavino
(Reuters) -Some natural gas producers in Western Canada are aggressively cutting output in an effort to ease an ongoing glut that this week tipped prices for the fuel into record negative territory, companies and analysts said.
Daily spot prices at the Alberta Energy Company (AECO) storage hub averaged minus 5 cents per million British thermal units on Thursday, after trading at record low levels of minus 18 cents this week. The benchmark averaged $1.03 per mmBtu so far in 2025, according to LSEG pricing data.
Analysts expect prices to remain under pressure as pipelines have become congested due in part to rising output from producers in Alberta and British Columbia, which has yet to be absorbed by a new liquefied natural gas export terminal.
That means producers must choose between temporarily shutting in wells, or continuing to drill and paying the cost of transporting the surplus gas away.
“Negative prices are forcing temporary wellhead shut-ins. We are seeing some reductions in gas supplies at this point and this may last until the end of the month,” said RBN Energy analyst Martin King.
Advantage Energy CEO Mike Belenkie declined to say exactly how much production his company has curtailed in response to the current dismal market conditions, but said the shut-ins exceed anything his company has previously done.
The Calgary-based producer had strategically reduced dry gas output in late 2024 and early 2025 due to low gas prices.
“These are the worst sustained prices we’ve seen, and therefore our shut-ins will be the most aggressive,” Belenkie said in an interview on Thursday.
“We’re trying to make sure that we shut in every penny that we can to avoid paying the market to take away our otherwise valuable energy product.”
NOT EASY TO DO
The Western Canadian natural gas market has not recovered from an extended period of weakness from oversupply and warmer winters that have reduced home heating demand.
Gas storage in Western Canada remains essentially at last year’s record highs, according to U.S. investment bank Jefferies, in part due to rising output from producers in anticipation of increasing demand from the startup this summer of the LNG Canada plant in British Columbia.
The slow ramp-up of that facility, however, has so far failed to be enough to draw down the supply glut that exists.
At the same time, planned and unplanned maintenance on TC Energy’s NGTL system and Great Lakes Gas Transmission system have created bottlenecks, trapping supply in Alberta, said RBN’s King.
TC Energy said in an email it does not comment on market dynamics.
Other prominent Western Canadian natural gas producers did not immediately respond to requests for comment.
There are contractual, marketing, and operational risks to shutting in wells, Advantage Energy’s Belenkie said, which is why not enough production has yet been curtailed to balance the market.
“There should not be a single dry gas well on-stream today in the entire country,” he said. “But it is not an easy thing to do, to shut in.”
(Reporting by Amanda Stephenson in Calgary and Scott DiSavino in New York;Editing by Marguerita Choy)
Comments