North American natural gas futures prices found some momentum this week amid colder weather across the United States. On Thursday, the January New York Mercantile Exchange gas futures contract settled at $6.970/MMBtu, up 54.0 cents day/day. February advanced 36.9 cents to $6.589.’
U.S. natural gas production also dipped below 100 Bcf/d this week on maintenance issues, aiding the upward price trend.
EBW Analytics Group analyst Eli Rubin said that supply freeze-offs “could compound market tightness. While downward pressure remains likely on a seasonal basis, the coming cold blast through the end of the year could still prompt another run higher first.”
Some of that cold is forecast for Texas, the main source of natural gas supply for Mexico. “The colder it is into Texas/ERCOT, and the longer the cold can linger into late December, the more bullish it will be” for natural gas prices, NatGasWeather analysts said.
Meanwhile, prices in West Texas recovered after plunging into negative territory last week. Waha, a key trading index for Mexico, was back up to $3.955 at the close on Wednesday.
Imports Dipping
Imports into Mexico have been on the lower side recently. “As the winter unfolds, U.S. pipeline exports to Mexico are weakening further,” Wood Mackenzie analyst Ricardo Falcón told NGI’s Mexico GPI. Wood Mackenzie’s preliminary estimates set December-to-date border flows at an average of 5.1 Bcf/d. This volume is 3% lower than November. It would be the fifth consecutive month of declines.
“Gas burn for power generation continues to follow its seasonal path into a weaker demand profile,” Falcón said. He said that higher dry gas output in Mexico is also offsetting the need for some pipeline imports. Mexican dry gas production so far in December has averaged nearly 2.8 Bcf/d.
According to NGI calculations, pipeline imports in Mexico from the United States were 4.562 Bcf on Thursday. South Texas accounted for 4.057 Bcf. The figures do not take into account intra-state trades within Texas.
Longer term however, the picture for U.S. imports remains bullish. This week, Kinder Morgan Inc. management said they expect U.S. net pipeline exports to Mexico to reach 9 Bcf/d by 2030. The 2030 projection is an upward revision from the 7 Bcf/d forecast earlier this year.
Projections for higher gas demand in Mexico have to do with planned LNG projects. In related news, this week former NextDecade executive Ivan Van der Walt took over as the head of Mexico Pacific Ltd. (MPL), replacing Doug Shanda. MPL has said it is looking at next year for an investment decision on the liquefaction project slated for Sonora state.
Sistrangas
Demand on Mexico’s Sistrangas on Wednesday (Dec. 14) was 4.622 Bcf, up from 4.479 Bcf a day earlier. The power sector was the biggest user of natural gas on the Sistrangas on Wednesday, at 1.444 Bcf. This was followed by the distribution segment (1.147 Bcf) and Petróleos Mexicanos, or Pemex (1.070 Bcf). Industrial end-users accounted for 961 Bcf of demand.
According to calculations from consultancy Gadex, natural gas pipeline imports from the United States into the Sistrangas were 3.280 Bcf as of Wednesday. The Sur de Texas-Tuxpan pipeline injected 674 MMcf into the system. Liquefied natural gas imports into the Sistrangas were 8 MMcf.
Mexico Cash Prices
On Wednesday, Los Ramones cash was down 42 cents day/day to $5.494. Monterrey via the Mier-Monterrey system fell 41.4 cents to $5.282.
Tuxpan in Veracruz via Cenagas saw the spot price fall 42.1 cents to $6.038.
Gains over the week could be found in the West. The Guadalajara price rose 7.4 cents to $5.656 on Wednesday. Farther north in El Encino, prices via Tarahumara were $4.650, 56.9 cents higher than the previous day.
On the Yucatán Peninsula, where Engie SA plans new pipeline capacity to bring in gas from Texas, the cash price at Mérida was $6.761 on Wednesday, down 42.3 cents.
U.S. Storage
On Thursday, the U.S. Energy Information Administration (EIA) reported a withdrawal of 50 Bcf of natural gas from underground storage for the week ended Dec. 9. This was basically in line with expectations.
The EIA reported that the South Central region actually saw an overall increase of 8 Bcf. This included a 10 Bcf injection into salts that was partially offset by a pull of 2 Bcf from nonsalt facilities.
Until Mexico develops storage capability, this is the storage system most readily available to the country. Buoying Mexico, storage levels in the South Central are now firmly higher than the five-year average.
For the week ended Dec. 9, total working gas in the South Central region stood at 1,199 Bcf, up from 1,160 Bcf for the same time one year ago. The figure was also 55 Bcf higher than the average 1,136 Bcf in storage for the same day between 2018-2022, EIA said.
