North American natural gas prices slumped for most of the week before the potential for colder weather provided a minor rally Wednesday and Thursday.
The New York Mercantile Exchange January natural gas futures contract settled at $5.962/MMBtu, up 23.9 cents on the day. February futures climbed 20.3 cents to $5.820.
Mild weather and U.S. production regularly above 100 Bcf/d is also helping to boost storage stocks, keeping prices in check. On Thursday, the U.S. Energy Information Administration (EIA) announced a paltry withdrawal of 21 Bcf. After falling more than 350 Bcf below the five-year average at the end of summer, analysts now see stocks flipping back to a surplus in the next couple of weeks.
NatGasWeather said Thursday afternoon, “There’s potential for a cold U.S. pattern to continue the last week of December, and it will need to if a sustained weather driven rally is to be expected. But for now, the weather data remains cold enough Dec. 16-22 for a bullish interpretation.”
EBW Analytics Group senior analyst Eli Rubin said, “Fundamentally, however, it will take a notably bullish forecast shift just to claw back weather-driven demand and Freeport LNG demand losses over the past week.”
A Mexico City natural gas buyer said the market “looked normal, no major disruptions,” with demand rising slightly. Much depends on where Mexico buyers are sourcing their gas, and at which pricing index.
This week, prices in West Texas slumped again into negative territory amid maintenance on pipelines and the ongoing lack of takeaway capacity. However, not too far away, California natural gas prices surged at some points above $30, amid colder weather in the Northwest.
Mexico’s natural gas production, meanwhile, continues its minor hot streak. Domestic production averaged 4.04 Bcf/d in October, up from 3.93 Bcf/d in October 2021, according to the latest data from upstream regulator Comisión Nacional de Hidrocarburos (CNH). The top gas-producing fields for October, all in the Southeast, were Quesqui (508 MMcf/d), Ixachi (301 MMcf/d), Maloob (297 MMcf/d), Akal (236 MMcf/d) and Onel (187 MMcf/d).
Imports accounted for 69% of Mexico’s gas supply in August, according to CNH. Excluding gas consumed by Petróleos Mexicanos, aka Pemex, the share of imports was 83%. Mexico’s total gas consumption, including Pemex, was about 8.6 Bcf/d.
According to NGI estimates, Mexico imported 5.04 Bcf on Thursday via pipeline, and the 10-day average was 4.90 Bcf/d. These figures do not include intra-state flows in Texas, which aren’t public.
Sistrangas
Demand on Mexico’s Sistrangas on Wednesday (Dec. 7) was 4.509 Bcf, up from 4.387 Bcf a day earlier. The power sector was the biggest user of natural gas on the Sistrangas on Wednesday, at 1.394 Bcf. This was followed by the distribution segment (1.115 Bcf) and Pemex (1.068 Bcf). Industrial end-users accounted for 932 Bcf of demand.
According to calculations from consultancy Gadex, natural gas pipeline imports from the United States into the Sistrangas were 3.557 Bcf as of Wednesday. The Sur de Texas-Tuxpan pipeline injected 634 MMcf into the system. Liquefied natural gas imports into the Sistrangas were 12 MMcf.
Mexico Cash Prices
In Mexico, NGI natural gas cash prices slumped this week. On Wednesday, Los Ramones was down 6.5 cents day/day to $4.421. Monterrey via the Mier-Monterrey system fell 6.6 cents to $4.221.
Tuxpan in Veracruz via Cenagas saw the spot price fall 6.3 cents to $4.964.
Losses were even more profound in the West. The Guadalajara price slipped 39.1 cents to $3.329 on Wednesday. Farther north in El Encino, prices via Tarahumara were $1.070, 72.4 cents lower 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 $5.678 on Wednesday, down 5.9 cents.
U.S. Storage
On Thursday, the EIA reported that the South Central region posted a 10 Bcf net injection for the week ended Dec. 2. This included a 13 Bcf build in salt facilities and a 3 Bcf withdrawal from nonsalts, EIA said.
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. 2, total working gas in the South Central region stood at 1,191 Bcf, up from 1,172 Bcf for the same time one year ago. The figure was also 34 Bcf higher than the average 1,157 Bcf in storage for the same day between 2018-2022, EIA said.
