Management’s Discussion and Analysis
Inflation The Canadian Consumer Price Index (CPI) inflation has significantly declined from 2.7 per cent in June to 1.6 per cent in September. Consumer inflation edged below three percent in early 2024, fluctuating between 2.9 per cent and 2.7 per cent from January to June. Consumer inflation slowed in the summer months, decelerating to the 2.0 per cent midpoint of the Bank of Canada’s target range in August. Excluding shelter costs, the yearly growth in consumer prices averaged 1.3 per cent during the first eight months of 2024. The Bank of Canada increased its policy rate from 0.25 per cent in the first quarter of 2022 to a peak of 5.00 per cent in July 2023, before making a series of reductions in 2024 down to 3.75 per cent in October 2024. The Bank of Canada remains committed to maintaining price stability for Canadians by keeping inflation close to the 2.0 per cent target. Analysts are also anticipating that inflation will remain within the Bank of Canada’s target range of 2.0 per cent to 3.0 per cent over the next two years, with further interest rate cuts expected to support maintaining the inflation target. Labour market The Canadian labour market remains soft—the unemployment rate trended higher in the first half of 2024, from 5.7 per cent in January and peaking at 6.6 per cent in August 2024, before declining to 6.5 per cent in September. Saskatchewan’s unemployment rate is slightly lower than the national rate, with an average rate of 5.4 per cent from January through September 2024, and is expected to remain second lowest among Canadian provinces. Saskatchewan Nature Gas Prices Despite the expectation for increased demand from the anticipated start-up of operations at LNG Canada’s facility in Kitimat, British Columbia, western Canadian natural gas prices remained low, as high production and high storage levels were met with modest demand and seasonal pipeline maintenance. Western Canada storage levels at September 2024 were 91 per cent full compared to 80 per cent full in the prior year and the three-year average of 72 per cent full. Saskatchewan’s natural gas prices were characterized by lower volatility and largely remained below $1.00 per gigajoule (GJ) since mid-June. High natural gas storage levels have also been a factor in Saskatchewan. At September 30, 2024 storage was 85 per cent full, which is 5 per cent higher than both the prior year and the three year average of 80 percent. The extremely low prices are expected to subside as increasing near term demand for natural gas from heating, power and liquified natural gas exports is anticipated. Natural gas storage in the United States dropped below the five-year maximum in August as US exports continued to grow and production remained relatively flat. The US is Canada’s largest export customer for natural gas. The AECO daily index averaged $0.65 per GJ through the quarter, compared to $2.46 per GJ the prior year as warmer temperatures and relatively full storage levels contributed to the low-price environment. Traditionally, most natural gas in Saskatchewan is priced at a differential to the AECO price, with this differential for the quarter averaging a premium of $0.01 per GJ compared to $0.06 per GJ the year prior. Lower overall prices are resulting in a comparable premium year- over-year. The following chart shows AECO natural gas prices:
AECO Monthly Index Historical Prices
$8.00
$7.00
Forward Price at September 30, 2024 Average Price: $2.76/GJ
2015-Present Average Price: $2.49/GJ
$6.00
$5.00
$4.00
$3.00
$2.00
$1.00
$0.00
2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029
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