Higher temperatures across Europe and an influx of LNG deliveries helped to loosen the market last week, weighing on prompt prices and softening the near curve.
Aggregate LDZ demand in Italy, France, the Netherlands, the UK and Belgium was 0.51 bcm lower y/y at 3.93 bcm in the week to 5 March, and it is forecast to be a further 1.06 bcm lower y/y (and 0.5 lower w/w) this week. Some limited upside demand will come from a revised schedule of outages for EDF’s French nuclear fleet this month, with 11.7 GW expected offline this week (up from the 10.4 GW forecast last Monday), increasing to 13 GW next week for the rest of March.
NBP D+1 closed at 43.6 p/therm on Friday, down by around 5% w/w. The NBP-TTF D+1 basis narrowed over the week, closing tighter than the UK’s commodity charge to bring gas into the country on all days expect 27 February. The narrowing basis slowed continental imports into the UK, which made net exports to Belgium via the IUK on 2-5 March. The UK still logged net imports from the continent on all but one day last week, given BBL imports. The NBP-TTF Q2 17 basis finally reversed to -0.08 p/therm on Friday from +0.49 p/therm a week earlier.
Norwegian flows were buoyed last week by fewer outages, and exports could be up to 26 mcm/d higher this week barring unplanned outages.
Russian flows fell last week, registering lower y/y imports for the first time in months, on softer demand. The ECJ has yet to issue a ruling on the EC-Gazprom agreement on Opal access, and with Naftogaz joining on the PGNiG side, prospects for a relatively quick resolution of the matter have receded. Separately, Gazprom announced that it expected to hold its next European gas auction in summer, which suggests it will only be offering incremental winter gas.
Storage draws were tepid last week, with the 1.8 bcm drawn some 1.3 bcm lower y/y. This meant that stock numbers are down to just a 15 bcm y/y shortfall, and this could narrow further with mild weather set to pare the stockdraw over the next two weeks.
LNG availability for Europe will remain keenly watched. On Monday, there were still several Qatari cargoes sailing from Ras Laffan towards Europe with undeclared final destinations. If they dock in Europe, this could boost supplies in the next two weeks above current expectations.
A big sell-off in coal saw cif ARA lose 8.3% last week. This helped lower the fuel switching support prices, with those on Friday’s close about 1 €/MWh lower w/w. Still, gas prices dipped below the 17.6 €/MWh trigger and now have started to move towards the next fuel switch trigger to the downside at 15.9 €/MWh. We have been expecting that this lower level is where the market will move to over the summer, particularly with the need for storage injections easing.
|Last week's changes in European balances and short-term outlook, mcm|
|Source: Country SOs, GSE,Energy Aspects|