Natural gas prices across Mexico decreased by 14.4% in March from February levels to $3.88/MMBtu (Peso 68.85/GJ), the lowest level for the index since the country's Energy Regulatory Commission (CRE) began tracking prices in July 2017.
The country's gas prices peaked at $4.55/MMbtu (Peso 80.45 MMbtu) in February. The index is composed of monthly transaction sales reports that marketers submit to CRE, and the index price includes marketing and transportation costs charged by marketers.
The reporting process does not differentiate among fixed-price or indexed deals, or between spot or forward transactions.
Much of Mexico's gas sales are still largely indexed to a one-month lag on a basket of US gas hubs. US gas prices experienced sharp increases in January due to cold weather across the country. This increase in gas prices in the US in January was experienced in Mexico in February.
S&P Global Platts Analytics can see that Mexican gas prices fell considerably in March, likely following the January-to-February decline in prices in the US.
US Henry Hub gas prices are expected to average below $3/MMBtu, through the remainder of 2018, which could limit the strength of indexed gas sales in Mexico, Platts Analytics projects.
Mexico's South, Peninsular regions expected to show premiums
However, regional supply constraints are expected to increasingly become an issue for the southern states, which could lead to premium prices forming in the South and Peninsular regions.
Prices decreased across Mexico's six regional price indexes reported by CRE. Prices decreased on average between 5.9% to 17.75%.
The region that experienced the most dramatic decrease in prices was region IV, which include the states of Aguascalientes, Colima, Jalisco, and Zacatecas.
Gas prices in region IV fell to $4.25/MMbtu in March from $5.19/MMbtu, a decrease of 17.75%. This region has been historically dependent on LNG shipments to the Manzanillo import terminal due to system limitations to ship gas via pipelines to Western Mexico.
LNG imports to the Manzanillo terminal held fairly steady from February to March, averaging around 350 MMcf/d.
The Platts Japan Korea Marker, an assessment for delivered spot gas in northeast Asia, fell roughly $0.75/MMBtu (7%) from February to March, which may have played into the larger month-on-month price decline in region IV.
The state where gas prices decreased the least was in region I, which is composed by the states of Baja California, Sonora and Sinaloa. Prices in that region decreased 5.9% in March to $5.68/MMBtu (Peso 100.6/GL) compared with February.
22 marketers were active in March
In March, 22 marketers operated in Mexico according to CRE, which submitted 176 transaction reports to the commission for a total of 1.6 Tcf of gas (5.39 Bcf/d).
According to CRE, about a third of Mexico's natural gas is being marketed by companies other than state companies CFE and Pemex.
The commission said it reported 10 atypical transactions, which are those in which price or volume are more than three standard deviations of the average of data reported.
