North American natural gas prices have gathered some momentum for the first time in many months amid tighter supply balances.
The New York Mercantile Exchange contract for September was trading at around $2.200/MMBtu on Thursday afternoon after the U.S. government announced that storage supplies in the country actually shrunk last week. This is rare during the summer months.
U.S. production of around 100 Bcf/d is also about 3 Bcf/d lower than summer highs.
Mexico, meanwhile, is importing strong levels of U.S. natural gas, a trend that began in April.
Over the past 10 days through Thursday, Mexico has imported 7.37 Bcf/d via pipeline, according to NGI estimates. Nueva Era pipeline began posting flows again on August 12 on its electronic bulletin board, “which is responsible for bringing the average pipeline export figure up,” according to NGI analyst Josiah Clinedinst.
Wood Mackenzie analyst Ricardo Falcón told NGI’s Mexico GPI that import figures of around 7.1 Bcf/d over the first 15 days of August are “the highest ever recorded” for this period.
This is “the fifth consecutive month of robust Mexico imports, which, among other factors, have resulted from strong cooling power loads and still-underperforming dry gas output” in Mexico, he said.
Mexico's dry gas output has decreased each of the past five months. “Notable downswings in aggregate supply from the Cactus-Ciudad Pemex-Nuevo Pemex gas processing complex have largely outpaced incremental production from Mexico’s gassier fields,” Falcón said.
LNG Demand Pull
Mexico’s imports of U.S. gas should increase on the back of LNG export projects souring U.S. gas.
This week, New Fortress Energy Inc. (NFE) confirmed the first shipment of U.S. natural gas liquefied in Mexico had been loaded and is on the water.
New York-based NFE disclosed it had successfully loaded a liquefied natural gas cargo at its 1.4 million metric tons/year (mmty) fast LNG facility offshore Altamira. Earlier in the month, the company pushed its target for a first cargo shipment in late July to mid-August after a series of delays starting in April.
NFE also disclosed its first LNG cargo would be loaded on the Energos Princess and delivered to the Pichilingue LNG import terminal in La Paz on Mexico’s Pacific Coast. NFE has a supply agreement with Mexico’s Comisión Federal de Electricidad (CFE) to provide up to 0.3 mmty of LNG to the import terminal in southern Baja California.
Construction of Sempra Infrastructure’s Energía Costa Azul (ECA) LNG Phase 1 in Mexico, however, is facing delays. The 3 mmty export project, which would also source U.S. natural gas, would now see the start of commercial operations pushed back from next year to the spring of 2026, management said during a second quarter earnings call.
Construction at the project in Ensenada in Mexico’s Baja California is approximately 85% complete. “However, our contractor has experienced labor retention and productivity issues in recent months,” CFO Karen Sedgwick said.
“As a result, our commercial operation date will be delayed until the spring of 2026. We are actively engaged with our contractor to advance the project, and we'll see increased features for the project in the form of additional carrying costs and lower estimated commissioning rent based on forward price curves,” she said.
Mexico Prices
In Mexico on Wednesday, natural gas cash prices at Los Ramones fell by 3.8 cents day/day to $2.318, according to NGI data. Monterrey via the Mier-Monterrey system was down 3.9 cents to $2.092. Tuxpan in Veracruz via Cenagas saw the spot price fall 3.3 cents to $2.859.
Out West, the Guadalajara natural gas price slipped by 2.0 cents to $2.078 on Wednesday. Farther north in El Encino, prices via Tarahumara were 34.3 cents, 1.7 cents lower than the previous day.
On the Yucatán Peninsula, the cash price at Mérida was $3.905 on Wednesday, down 2.2 cents.
U.S. Storage
On Thursday, the U.S. Energy Information Administration reported a rare withdrawal of 6 Bcf from Lower 48 storage for the week ended August 9. The figure pushed prices northward.
The South Central region, close to Mexico pipelines, saw yet another withdrawal. The region saw a draw of 26 Bcf that included a 14 Bcf decrease in salt stocks and a loss of 12 Bcf in nonsalts.
For the week ended August 9, total working gas in the U.S. South Central region stood at 1,125 Bcf, up from 1,097 Bcf for the same time one year ago. The figure was 104 Bcf higher than the five-year average of 1,021 Bcf.
