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North American NatGas Trade Volumes Rose While Prices Fell

Volumes rose but prices fell across the board in the natural gas trade among Canada, the United States and Mexico during the first half of this year, according to the latest scorecard kept by the U.S. Department of Energy.

The largest item on the North American market, Canadian exports to the United States, rose by 6.9% to 1.497 Tcf in the first six months of 2016 from 1.401 Tcf in the same period of 2015, according to the department’s natural gas regulation division.

But gas sales competition driven by the shale supply gale cut the first-half 2016 average border price of Canadian exports by 45% to US$1.78/MMBtu from US$3.23/MMBtu during January through June of 2015.

Volumes of the second-biggest continental gas trade block, U.S. exports to Mexico, shot up by 36% to 628.9 Bcf in first-half 2016 from 462.2 Bcf during the same period last year.

But prices on the southern side of the continental market went the same direction as the northern trade. The average fetched by U.S. exports to Mexico dropped by 27.2% to US$2.18/MMBtu in first-half 2016 from US$3.00 a year earlier.

Volumes of U.S. gas exports to Canada rose by 1.8% to 389.6 Bcf in January through June this year from 382.7 Bcf in first-half 2015.

But the six-month average price fetched by northbound pipeline deliveries from the U.S. fell by 37.3% to US$2.17/MMBtu this year from US$3.46/MMBtu in the same period of 2015.

Prices earned by U.S. exports consistently outperform the value of southbound Canadian shipments on the continental gas trade scorecards. U.S. deliveries go to the highest-priced Canadian markets in Ontario, Quebec and the Atlantic provinces. Canadian exports go to destinations with varying prices across North America.

Mexican exports to the U.S. remained negligible at 400 MMcf in first-half 2016, up from zero a year earlier. The average border price of northbound Mexican gas was even lower than the Canadian average, at US$1.18/MMBtu.

The latest gas trade scorecard also registers effects of growing competition on global liquefied natural gas (LNG) markets, combined with low oil prices, which depress the value of overseas sales contracts that use indexes linking the values of the two commodities.

As new terminals went into operation the volume of LNG exports from the United States took off in first-half 2016, jumping by 559.3% to 36.3 Bcf from just a negligible amount a year earlier.

But the average price fetched by U.S.-sourced tanker cargoes fell by 44.9% to US$4.17/MMBtu in the first six months of 2016 from US$7.58/MMBtu during the same period of 2015.

U.S. gas merchants grew international sales three times as fast as Canadian dealers. Total north- and southbound U.S. export volumes rose by 23.4% to 1.057 Tcf in first-half 2016 from 856.2 Bcf during the same period of 2015.

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