U.S. natural gas futures facing Mexican buyers and sellers were a roller coaster this week as prices jumped early in the week as October rolled off the board followed by a dive on Wednesday when November took over as the front month.
“Markets are very, very nervy,” a Mexico City-based trader told NGI’s Mexico GPI. “We hope nothing extraordinary happens. Because in Mexico no one really has hedges to cover for extraor-dinary events.”
Analysts at EBW Analytics Group said “technicals and fun-damentals indicate bearish momentum is likely to continue” for U.S. prices, which at the main benchmarks have been at or above the $5.00/MMBtu mark over the last month. A recent survey of oil and gas companies by the Federal Reserve Bank of Dallas was also bearish and the consensus was that commodity prices by year’s end would be lower than where they stand today.
This is in contrast to the rest of the world where prices can’t seem to find a ceiling on the back of soaring global demand
FRIDAY, OCTOBER 1, 2021 - VOL. 5, NO. 67
U.S. Natural Gas Market Snapshot• The prompt month jumps 39 cents• Supply concerns intensify in Europe• Domestic demand begins to ease
Read more on pg. 6
All prices are in $U.S./MMBtu. Data are excerpted directly from NGI's Daily Gas Price Index except for the (1) South Texas Avg, which is a simple average of NGPL S. Tx, Tennessee S. Tx, and TETCO S. Tx. For more information on how we calculate our next-day and next-month price indexes, please refer to our Price Index Methodology, which is located here.
NOTE: NGI's Mexico Gas Price Index plans to calculate our own Mexico spot prices in the same manner as we do for locations in the United States & Canada as soon as possible. For more information, or if you wish to participate in NGI's Mexico natural gas price survey, please contact Dexter Steis at +1-703-318-8848, or e-mail us at [email protected].
IPGN prices are published by CRE. Companies represents the number of marketers who submitted trade data to CRE. Vol is total reported commercialized volumes converted to MMcf/d. Deals represents the net number of transactions CRE used to calculate the IPGN (gross transactions reported lessatypical deals CRE excluded from the data). For more information, and access to raw aggregatedata behind these figures, including exchange rate information, please visit the CRE website, which you can access here.
MEXICO IPGN PRICES(MXN/GJ & US/MMBtu)
See page 2 for a complete listing of NGI’s Mexico Natural Gas Prices
1) Transport rates for U.S. interstates, SISTRANGAS, and other Mexico pipelines taken from electronic bulletin boards (EBBs). However, Texas intrastate pipelines do not have EBBs, so our transportation costs for these are an estimates. For more information on which charges we include in these fees, please see the below note.
2) Calculated Monterrey price would be the same as Los Ramones, and calculated El Encino would be the same as Torreon, if we had used the SISTRANGAS tariff, since SISTRANGAS is a zone based system.
3) U.S. gas is not likely to be delivered to Cactus or Salina Cruz, but these represent a theoretical delivered price in Zonas Sur and Istmo.
The current assessments are estimated US-to-Mexico natural gas cost plus transport prices; please refer to the Mexico Gas Price Index Methodology for pipeline-specific costs and for any additional information.
Moving forward, NGI believes the best price transparency are price indexes based on actual transactions, and is asking all buyers and sellers of natural gas in Mexico to support this effort by providing those transactions to NGI on a confidential basis. NGI was at the forefront of this market price deregulation in the United States in the 1980s and has the experience to help the Mexico market do the same in 2019 and beyond. For more information, please contact Dexter Steis or Pat Rau at +1 (703) 318-8848 or [email protected].
Want NGI's Mexico Natural Gas Price Index in a spreadsheet? Download a sample in Excel- friendly format.
root over the summer months have begun to ease, however, as shoulder season weather conditions settle in and injections of gas into storage mount.
“The pattern continues to favor very warm weather in the north-ern half of the nation” through October, keeping early-season heating degree days “well below normal,” while conditions in the southern U.S. are likely to prove comfortable as well, dampening cooling de-mand, Bespoke Weather Services said Thursday. If forecasts prove accurate, the firm said, October 2021 would be the second-weakest in terms of gas-weighted degree days since 1980.
Amid the mild weather and modest domestic demand, inven-tories are rising. The U.S. Energy Information Administration (EIA) on Thursday reported an injection of 88 Bcf natural gas into storage for the week ended Sept. 24. The result, which topped the midpoint of analysts’ estimates, easily exceeded the 74 Bcf print for the same week in 2020 and the five-year average of 72 Bcf.
Storage levels in the United States over the past four weeks have steadily climbed, and analysts expect continued strong injec-tions well into October.
“We now project the next two numbers to be at or above the 100 mark, in terms of weekly injections,” Bespoke said.
Prior to Thursday’s EIA report, the median analyst estimate from a Bloomberg survey came in at 86 Bcf, while a Reuters poll landed on a build of 87 Bcf.
The Wall Street Journal’s weekly survey produced an 84 Bcf av-erage increase. NGI modeled a build of 89 Bcf.
The latest injection lifted inventories to 3,170 Bcf, though stocks held below the year-earlier level of 3,745 Bcf and the five-year aver-age of 3,383 Bcf. The Midwest and East regions led with builds of 30 Bcf and 28 Bcf, respectively, according to EIA.
Looking ahead, analysts anticipate an even larger injection. “Next week’s EIA report is likely to easily print over 100 Bcf,
and potentially closer to 110 Bcf, thereby improving deficits” to the five-year average, NatGasWeather said. “The following
MARKET
November Natural Gas Futures Bounce Back As Global Supply Woes Weigh on Markets
Steady calls for U.S. exports and global supply worries out-shined a robust government inventory print and forecasts for light domestic demand, sending natural gas futures higher on Thursday.
The November Nymex contract, a day after shedding 40.3 cents in its debut as the front month, recovered ground and advanced 39.0 cents day/day to settle at $5.867/MMBtu. December rose 39.6 cents to $5.991.
NGI’s Spot Gas National Avg. ticked down a half-cent to $5.250.A tight global market -- the result of extreme weather in 2021
as well as both modest production and maintenance catch-up work in the pandemic’s wake -- has fueled multiple futures rallies this month alone. The prompt month soared above $6.00 in intraday trading earlier this week, reaching highs last seen more than a decade ago, while prices in Europe and Asia set records.
Outlooks point to the potential for a cold winter in Europe, where gas stockpiles are already precariously light, and power demand is ramping up in China and elsewhere in Asia. These factors are driv-ing the surges in global prices as well as demand for U.S. exports of liquefied natural gas (LNG), fueling gains for Henry Hub futures.
“Asian and European markets are freaked out,” one participant on The Desk’s online energy platform Enelyst said Thursday. “Ev-erybody is worried about low natty stocks in advance of winter.”
Commodity Weather Group, in an updated forecast this week, said Europe could experience “the coldest winter since 2012-13” and among the top 10 coldest in more than 40 years.
Compounding matters: As countries across Europe push for increased use of renewable fuels, common alternatives to gas in past years -- coal chief among them -- are also in short supply.
“Heads have been spinning like a Syfy remake of ‘The Exorcist’ lately,” another analyst said on Enelyst.
Concerns about weak U.S. natural gas supplies that took ...cont' pg. 8
Note: Prices in this table represent our estimate of the daily base firm VPM price for each region, based on the published VPM formula, and using Daily GPI indexes as the price reference. For more information, or if you wish to participate in NGI's Mexico natural gas price survey, please contact Dexter Steis at +1-703-318-8848, or e-mail us at [email protected].
for natural gas amid tight supplies.In North Asia, Japan-Korea Marker (JKM) spot prices were as-
sessed at an all-time high of $34.47 on Thursday, nearly $3.00 above Wednesday’s levels, while British and Dutch benchmarks now sit well above $30 and continue to set records.
The higher prices in Mexico were also having ripple effects across the economy. On Thursday, Mexico’s Central Bank raised interest rates for the third straight meeting, to 4.75%, citing inflation worries including higher energy and food prices. Officials now see Mexico inflation hitting 6.2% in the fourth quarter from a previous estimate of 5.7%.
A trader for a natural gas generator in Mexico City said power prices after initially lagging were also now reflecting the cost of natural gas.
Domestic natural gas production in Mexico meanwhile is unlikely to substitute for imported U.S. fuel and fell in the latest figures released by Comisión Nacional de Hidrocarburos (CNH). Mexico natural gas production averaged 3.81 Bcf/d in August, down from 3.86 Bcf/d in July and 3.91 Bcf/d in August 2020.
Gas imports from the United States are also dipping, as is typical for the shoulder season in Mexico. Flows into Mexico
one is also likely to be over 100 Bcf and a bit larger than normal to further improve deficits.”
Cash MixedSpot gas prices varied across the Lower 48, with a mix of mostly
modest gains and losses.In the Midwest, Joliet gained 11.5 cents day/day to average
$5.380 and Defiance picked up 8.0 cents to $5.265.El Paso Permian in Texas added 6.5 cents to $5.095.There were more losses than gains in the East, however,
with Tenn Zone 4 200L down 5.0 cents to $5.020 and Columbia Gas off 15.5 cents to $4.615.
NatGasWeather said through this week and into next week demand would be modest. It noted a rainy weather system over the Northwest this week, along with “two different ones over the Plains, and a fourth over New England. Temperatures with these systems are in the 50s to 70s besides a warmer one over Texas and
the Southern Plains with highs of 80s.”Looking to the second week of October, the forecaster added,
“high pressure will rule most of the U.S. with above-normal tempera-tures, which for early fall means perfect highs of 60s to 80s.” The firm added that “it won’t be until the last 10 days of October before more impressive cold shots arrive” in the Lower 48.
All of that noted, there will be demand exceptions. Swaths of the Southwest are still expected to see highs in the 90s this week and potentially next, and Southern California could see similar condi-tions this weekend. Temperatures in Los Angeles, for example, had cooled into the 70s this week, but National Weather Service forecasts now show highs in the 90s beginning Friday. Temperatures across Southern California are expected to be 10 degrees or more above normal this weekend.
With temperatures relatively cool on Thursday, however, hubs in California posted losses. SoCal Citygate led the way, dropping 82.0 cents to $6.265. n
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NGI's MexIco GPI
FrIday, october 1, 2021VoluMe 5, No. 67
ISSN 2577-9966 (oNlINe)
were 5.87 Bcf on Thursday and the 10-day average was 5.97 Bcf/d, according to NGI calculations.
SistrangasMexico’s Sistrangas five-day line pack average was 6.812 Bcf/d
on Wednesday, just below the optimal line pack of 6.86-7.29 Bcf needed to guarantee sufficient pressure in the system.
Demand on the Sistrangas on Wednesday (Sept. 29) was 4.377 Bcf, basically flat compared with 4.385 Bcf a week earlier. Mexico gas production fed into the Sistrangas rose week/week to 1.427 Bcf on Wednesday from 1.368 Bcf. The processing centers at Nuevo Pemex (450 MMcf), Burgos (302 MMcf) and Cactus (354 MMcf) were all up on the week and were the leading injection points.
According to Gadex calculations, pipeline imports from the United
States into the Sistrangas were 3.064 Bcf on Wednesday, compared to 3.067 Bcf on Sept. 22. Liquefied natural gas imports into the Sis-trangas on Wednesday were flat week/week at 7 MMcf.
Mexico PricesAt points key to Mexico trades, November futures slumped
on Wednesday. The Henry Hub October contract closed at $5.490 on Wednesday, down 40.3. Agua Dulce was down by 41.5 cents at $5.450, while Waha slipped 42.8 cents to close at $5.146.
Houston Ship Channel prices for October settled at $5.401, down 41.5 cents.
In Mexico, NGI natural gas spot prices dipped in the north-east, with Los Ramones down 20.7 cents at close on Wednesday to $5.786. Monterrey fell 20.3 cents to $5.672.
Tuxpan in Veracruz saw the spot price down by 20.8 cents on Wednesday to $6.280. In the West, the Guadalajara price fell 15.6 cents to $6.160. Farther north in El Encino, prices were $5.737,
down 15.2 cents from the previous day.On the Yucatán Peninsula, the cash price at Mérida was $6.942
on Wednesday, down by 21.7 cents.
U.S. Gas InjectionsOn Thursday, the U.S. Energy Information Administration
(EIA) reported an injection of 88 Bcf into natural gas storage for the week ended Sept. 17, slightly above market expectations.
The South Central saw a storage increase of 23 Bcf, including a 12 Bcf injection into nonsalt facilities and an 11 Bcf build in salts.
Total working gas in the South Central region stood at 1,013 Bcf for the reporting period, down from 1,301 Bcf for the same time one year ago. The figure was also 72 Bcf lower than the average 1,085 Bcf in storage for the same day between 2017-2021, EIA said. n
