North American natural gas prices were kept in check by robust U.S. production this week.
On Monday, the December New York Mercantile Exchange natural gas contract rolled off the board at $6.712/MMBtu. January as the front month has been up and down since. On Thursday, the January contract settled at $6.738, off 19.2 cents day/day. February futures slid 18.7 cents to $6.631.
U.S. production on Wednesday was again strong at 101 Bcf/d. Tudor, Pickering, Holt & Co. analysts said production in recent weeks has held around 101-102 Bcf/d, near record highs. They noted strong activity in the Haynesville Shale and Permian Basin, key basins for natural gas buyers in Mexico.
“With prices around $6, buyers in Mexico aren’t really concerned as they were in the summer,” a Mexico City-based marketer told NGI’s Mexico GPI. “They seem pretty confident.”
Mexico imported 5.233 Bcf via pipeline from the United States on Thursday, with 4.365 Bcf exiting through South Texas.
U.S. natural gas demand is expected to intensify later in December, strengthening prices, although there are numerous caveats.
NatGasWeather analysts said cold weather “might prevent natural gas prices from plunging too far.” But healthy production could stymie this, along with the fact that there are still “no signs of when Freeport LNG will finally resume operations, but with many expecting it will be further delayed. And it’s worth noting the weather models teased a frosty U.S. pattern Dec. 1-7 only to back off considerably.”
CFE Propelling Market
Mexico’s Comisión Federal de Electricidad (CFE), meanwhile, has announced numerous deals with private sector firms promoting a slew of natural gas projects.
On Thursday, a project was launched. CFEnergía, the state company’s international marketing arm, put out a call for interest in an LNG export project in Coatzacoalcos. Capacity would be up to 600 MMcf/d.
The offer is directed “to investors and private companies in the energy sector to gauge interest in the development of infrastructure for the liquefaction and commercialization of a liquefied natural gas in the port of Coatzacoalcos, Veracruz, Mexico.”
Pre-registration is open until Sunday (Dec. 4). More information is available here.
“On the one hand, this is a great sign for the natural gas market,” an industry participant in Mexico told NGI’s Mexico GPI. “But on the other hand, it puts a bad message out there. It says, if you want to be successful in the natural gas market in Mexico, you need to team up with CFE.”
The Coatzacoalcos project would replace a previously planned LNG export facility planned for Salina Cruz, on the Pacific Coast. Gas from Coatzacoalcos would be sent to Europe.
Earlier in the week, CFE also announced it had struck a deal with French firm Engie SA for the expansion of the Mayakan pipeline in the Yucatán Peninsula.
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Demand on Mexico’s Sistrangas on Wednesday (Nov. 30) was 4.544 Bcf, up from 4.501 Bcf a day earlier. The power sector was the biggest user of natural gas on the Sistrangas on Tuesday, at 1.413 Bcf. This was followed by the distribution segment (1.123 Bcf) and Pemex (1.049 Bcf). Industrial end-users accounted for 951 Bcf of demand.
According to calculations from consultancy Gadex, natural gas pipeline imports from the United States into the Sistrangas were 3.153 Bcf as of Tuesday. The Sur de Texas-Tuxpan pipeline injected 577 MMcf into the system. LNG imports into the Sistrangas were 9 MMcf.
Mexico Cash Prices
In Mexico, NGI natural gas cash prices rose on average during the course of November. On Wednesday, Los Ramones was down 3.7 cents day/day to $5.932. Monterrey via the Mier-Monterrey system fell 3.7 cents to $5.932.
Tuxpan in Veracruz via Cenagas saw the spot price fall 4.1 cents to $6.375.
In the West, the Guadalajara price slipped 15.6 cents to $6.455. Farther north in El Encino, prices via Tarahumara were $5.794, 26.2 cents lower than the previous day. On the Yucatán Peninsula, the cash price at Mérida was $7.218 on Wednesday, down 5.0 cents.
On Thursday, the Energy Information Administration (EIA) reported a 81 Bcf withdrawal from natural gas storage inventories for the week ending Nov. 25. The result was higher than normal for this time of year.
The South Central withdrew 19 Bcf, which included a 15 Bcf drop from nonsalt facilities and a 4 Bcf pull from salts. Until Mexico develops storage capability, this is the storage system most readily available to the country. In good news for Mexico, South Central storage has seen injections rise at a clip such that levels now are higher than the five-year average.
For the week ended Nov. 25, total working gas in the South Central region stood at 1,181 Bcf, down from 1,187 Bcf for the same time one year ago. The figure, however, was 20 Bcf higher than the average 1,161 Bcf in storage for the same day between 2018-2022, EIA said.
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