Western Canadian natural gas producers are implementing significant production cuts to address an unprecedented oversupply that has driven spot prices into deeply negative territory. This drastic measure reflects a market overwhelmed by surging output and constrained by inadequate export infrastructure and pipeline bottlenecks, forcing companies to either cease operations or incur substantial costs to dispose of surplus fuel.
The Alberta Energy Company (AECO) storage hub, a key benchmark for Western Canadian natural gas, experienced spot prices averaging minus 5 cents per million British thermal units (mmBtu) on Thursday. Earlier in the week, prices plumbed record lows of minus 18 cents per mmBtu. For context, the benchmark averaged $1.03 per mmBtu year-to-date in 2025, according to LSEG pricing data, highlighting the severity of the current price collapse.
Analysts attribute the prolonged market pressure to a combination of factors. Increased production from Alberta and British Columbia has outpaced the absorption capacity of existing infrastructure, particularly the new liquefied natural gas (LNG) export terminal, which has not yet reached its full operational capacity. This imbalance compels producers to make difficult economic decisions: temporarily shutting down wells or continuing to produce and bearing the cost of transporting excess gas.
RBN Energy analyst Martin King observed that these negative wellhead prices are directly instigating temporary shut-ins of production. He anticipates these reductions in gas supply may persist through the end of the month. Mike Belenkie, CEO of Advantage Energy, confirmed that his company’s production curtailments are exceeding previous levels, though he declined to specify exact volumes. Advantage Energy had proactively reduced its dry gas output in late 2024 and early 2025 in anticipation of persistently low prices. Belenkie described the current market conditions as the “worst sustained prices” the company has encountered, necessitating the most aggressive shut-in strategy to avoid paying to offload their product.
The Western Canadian natural gas market has struggled with a prolonged period of weakness, exacerbated by oversupply and unseasonably mild winters that have suppressed demand for heating. Storage levels in Western Canada remain near record highs from the previous year, according to Jefferies. This situation is partly a consequence of producers increasing output in anticipation of higher demand from the anticipated summer startup of the LNG Canada facility in British Columbia. However, the gradual ramp-up of this export terminal has not been sufficient to alleviate the existing supply glut. Compounding these issues, planned and unplanned maintenance on critical pipeline systems, including TC Energy’s NGTL system and the Great Lakes Gas Transmission system, have created significant bottlenecks, trapping supply within Alberta and further constricting market access.
Nathan hunts down the latest corporate deals faster than you can brew your morning coffee. He’s famous for scoring exclusive CEO soundbites—often by offering his legendary homemade brownies in exchange. Outside the newsroom, Nathan solves mystery puzzles, proving he can crack even the toughest business cases.