The Atlantic storm season has come on strong early this year and with great force, leading to reduced demand for natural gas on both sides of the U.S.-Mexico border.
Hurricane Beryl barreled into Mexico’s Yucatán Peninsula last weekend, impacting power temporarily in the area. It then moved northward and made landfall on Monday in Texas near Houston, where damage has so far proved more serious.
Power for millions of Greater Houston area residents remained offline on Thursday. Meanwhile, Freeport LNG Development LP was taking limited volumes with a restart uncertain.
New York Mercantile Exchange natural gas prices for delivery in August this week kept sinking closer to the $2/MMBtu level. The August contract slipped 6.1 cents day/day to settle at $2.268 on Thursday.
Mexico imports of U.S. natural gas have also dipped lower.
“Mexico’s natural gas market continues to face high volatility this summer,” Wood Mackenzie analyst Ricardo Falcón told NGI’s Mexico GPI. “After reaching an all-time high in June by crossing the 7 Bcf/d line, its imports of U.S. piped gas soon began to face the effects of a busy hurricane season.”
Wood Mackenzie pegged border flows at 6.8 Bcf/d so far this month, down 2% from last month.
“Although still mild, this change underscores the big swings that Mexican fundamentals can face at short intervals, especially when considering the localized effects of tropical storms with cyclonic potential. Hurricane Beryl is a good example of it,” Falcón said.
In the first week of July, Mexico imports dropped by nearly 230 MMcf/d against the prior 30-day average, he said. “No major damages on gas-related infrastructure have so far been reported along the Mexican Gulf corridor. However, demand weakness seems material and will likely continue to be so as back-to-back storms impact cooling loads in the power sector.”
Beryl was the second major storm so far this summer. Tropical Storm Alberto, the first named storm of the Atlantic storm season, made landfall in June near Tampico, Mexico.
Mexico independent analyst Santiago Villareal said Beryl “hasn’t really impacted the Mexico natural gas market. Nothing shut down. Trading was a little bit slow on Monday, but that was expected.”
When asked whether Mexico end-users should worry over the dependability of Texan energy given so many recent problems, Villarreal said, “Mexico depends on Texas natural gas. Not on electricity. What is on the news now is the reliability” of Houston’s largest power utility, CenterPoint Energy Inc., also the Freeport liquefied natural gas facility’s power provider.
CenterPoint, which serves about three million customers, reported power failures of up to 2.26 million-plus customers as Beryl hammered the region. An estimated 500,000 customers may not have power until next week, according to CEO Jason Wells.
Colorado State University (CSU) is now forecasting 12 hurricanes and six major hurricanes in the Atlantic for this year, one more each than previously forecast.
“We have slightly increased our forecast and continue to call for an extremely active Atlantic hurricane season in 2024,” CSU forecasters led by Philip J. Klotzbach said. “Sea surface temperatures averaged across the hurricane Main Development Region of the tropical Atlantic and Caribbean remain near record warm levels.”
Mexico Upstream
With the elections in Mexico now over, there has been a flurry of news from the private sector on plans for more domestic natural gas production.
Mexico’s Grupo Carso, SAB de CV, a conglomerate owned by billionaire Carlos Slim, signed a services contract with state oil company Petróleos Mexicanos (Pemex) to help develop the Lakach deepwater natural gas field off Mexico’s southeastern coast.
Meanwhile, Italy’s Eni SpA, one of Mexico’s leading private sector producers, said it found more oil and associated natural gas in shallow waters offshore Mexico. The Yopaat-1 EXP exploration well in Block 9 of the Cuenca Salina in the Sureste Basin could hold 300-400 million boe, the company said.
Finally, Greece’s Corinth Pipeworks said it had secured a contract with Woodside Energy Group Ltd. to deliver pipes for its deepwater oil project offshore Mexico. Australia’s Woodside and Pemex are moving ahead with the $7.2 billion Trion ultra-deepwater oil and gas project in the Gulf of Mexico.
Pemex produced 3.65 Bcf/d, or 95% of total gas output in May, with private sector operators accounting for the remainder, according to upstream regulator Comisión Nacional de Hidrocarburos (CNH).
It is unclear whether the private sector could play a greater role under the upcoming administration of President-Elect Claudia Sheinbaum.
Mexico Prices
In Mexico on Wednesday, natural gas cash prices at Los Ramones rose by 15.0 cents day/day to $2.466, according to NGI data. Monterrey via the Mier-Monterrey system was up 14.7 cents to $2.226. Tuxpan in Veracruz via Cenagas saw the spot price rise 15.4 cents to $3.231.
Out West, the Guadalajara natural gas price rose 34.3 cents to $3.159 on Wednesday. Farther north in El Encino, prices via Tarahumara were $2.272, 52.7 cents higher than the previous day.
On the Yucatán Peninsula, the cash price at Mérida was $4.144 on Wednesday, up 16.0 cents.
U.S. Storage
On Thursday, the U.S. Energy Information Administration (EIA) reported a 65 Bcf injection into storage for the week ended July 5. The figure sent prices lower.
The South Central region, close to Mexico pipelines, saw a build of 9 Bcf that included a 8 Bcf increase in nonsalt stocks and a gain of 1 Bcf in salts.
For the week ended July 5, total working gas in the U.S. South Central region stood at 1,183 Bcf, up from 1,146 Bcf for the same time one year ago. The figure was 147 Bcf higher than the five-year average of 1,036 Bcf.
