• June Nymex futures up 2.0 cents to $2.598, July up 1.9 cents to $2.611
  • NGPL maintenance limits northbound flows as Permian prices plunge deep into negatives
  • Cenagas head disputes reports, says Cempoala project to move forward

The natural gas futures market turned in a quiet day of trading Friday as the latest readings on fundamentals didn’t offer much to excite traders and peel them away from their holiday plans. In the spot market, pipeline maintenance drove record lows in the Midcontinent and sent stopped-up West Texas deep into the red; the NGI Spot Gas National Avg. dropped 27.0 cents to $1.805/MMBtu.

The June Nymex futures contract notched 2.0 cents to settle at $2.598 after going as high as $2.604 and as low as $2.542. July added 1.9 cents, settling at $2.611, while August settled at $2.621, up 1.7 cents.

Meanwhile, the Energy Information Administration (EIA) on Thursday reported a 100 Bcf injection into U.S. natural gas stocks for the week ended May 17, versus a 93 Bcf injection in the year-ago period and a five-year average 88 Bcf build. Total Lower 48 working gas in underground storage stood at 1,753 Bcf as of May 17, 137 Bcf (8.5%) above last year’s stocks but 274 Bcf (minus 13.5%) lower than the five-year average, according to EIA.

Analysts with Raymond James & Associates said the 100 Bcf build implies the market was 1.7 Bcf/d looser versus the same week last year, excluding weather-related demand. Over the past four weeks, the market has averaged 2.4 Bcf/d looser year/year, according to the firm.

Genscape Inc. analysts viewed the 100 Bcf injection as about 3.7 Bcf/d looser versus the five-year average when compared to degree days and normal seasonality.

Tudor, Pickering, Holt & Co. (TPH) analysts observed that inventories have sat at a 9% surplus to year-ago levels throughout the month of May, with builds continuing to track above the five-year average.

“Total degree days came in 8% above the five-year average, and the weather-adjusted oversupply is sitting at 3 Bcf/d (up from 2 Bcf/d last week),” the TPH team said. Liquefied natural gas (LNG) “export volumes continue to ramp, reaching an all-time high of 5.98 Bcf/d late last week...we see strong LNG exports as key to temporarily balancing the market in 3Q2019. A preliminary look at next week has inventories building by 103 Bcf, compared to a five-year average 95 Bcf build.”

West Texas, Midcon Get Crushed

A maintenance event restricting northbound flows through Kansas on Natural Gas Pipeline Co. of America (NGPL) appeared to cause significant and, in some areas, unprecedented weakness for spot prices in West Texas and the Midcontinent Friday.

NGPL declared a force majeure Thursday due to a “pipeline anomaly” discovered on the Amarillo #3 mainline in its Midcontinent Zone. NGPL said it would be reducing the maximum operating pressure through the area, resulting in a constraint on northbound capacity through Compressor Station 194 in Ellsworth County, KS.

“This change was reflected in intraday and timely cycle data that showed 614 MMcf/d in nominations being revised down” for Thursday’s intraday cycles and for Friday’s timely and evening cycles, according to Genscape analyst Matt McDowell. “Flow out of NGPL’s 365 MMcf/d Permian leg also saw decreases day/day as nominations were backed up along the Amarillo mainline.”

Prices throughout West Texas posted hefty losses, resulting in widespread negative pricing that has become all-too-familiar for Permian Basin producers in recent months. Waha plunged $2.415 to average minus $2.305.

This price weakness migrated further north Friday, resulting in new all-time lows for NGPL Midcontinent and OGT amid all the congestion in the region. NGPL Midcontinent averaged minus 6.0 cents on the day, a $1.720 day/day drop and the lowest average ever recorded at the location, Daily GPI historical data show. The lowest individual trade at NGPL Midcontinent Friday was also a new record at minus $1.000. Trading at OGT set new lows for that location also, with prices dropping 74.5 cents to 89.0 cents, including single trades as low as minus 25.0 cents.

Mexico Roundup

The head of Mexico’s Cenagas pipeline operator, Elvira Daniel, said over the weekend the Cempoala project would go ahead as planned, despite reports that the project was stalled.

Reformahad reported that the contracts in place for reconfiguring the compressor station had been cancelled, including the contract awarded to the consortium of Taylor Servicios Tecnicos SA de CV, an engineering firm based in Tabasco, and MAJA Consulting Group SA de CV, headquartered in Veracruz, in a tender process last year.

If it is completed as planned, the reconfiguration would allow the 1.4 Bcf/d compressor station to move gas south through central Mexico and toward the southeast, in the reverse direction of the current flow on that section of the Sistrangas.

Southeast Mexico, and in particular the Yucatan Peninsula, suffers from recurring gas shortages and power outages, especially during peak summer months. U.S gas imports currently do not reach southeast Mexico, while associated gas production at the southern offshore oilfields operated by Petróleos Mexicanos (Pemex) has dropped sharply in recent years.

The Cempoala project would take advantage of supply from the Sur de Texas-Tuxpan marine pipeline, due online at the end of June, and would displace gas currently flowing south-north on the Sistrangas pipelines in that area and thus ease the deficit in the south.