Mild weather curbed gas demand across Europe in March, thus slowing the stockdraw and shrinking the y/y storage shortfall that had grown in the first two months of the year.
UK aggregate gas demand was 8.03 bcm last month, down by 0.76 bcm (9%) y/y and comfortably below the historical March average. At the same time, supply fell to 8.02 bcm, down by 0.87 bcm y/y, as Norwegian and continental receipts slipped. As of 1 April, UK stocks stood at 1.03 bcm, only 0.13 bcm lower y/y. Given that Centrica Storage (CSL) announced on 12 April that Rough will not be returning to injections in the 2017-18 storage year (see our E-mail alert: Centrica announces Rough injections will be offline this storage year, hiking UK gas exports in Q3 17, 12 April 2017), the UK will have considerably less injection demand this summer, particularly in Q3 17, when it had been expected that Rough might return. This means that the 1.4 bcm of gas that we had expected to be injected will now need to be exported to the continent and will thus help fill European storage instead. A higher level of Q3 17 exports means that the NBP will need to be at a wider discount to the TTF over those months than previously anticipated.
Dutch gas demand fell by 15% y/y in March to 3.5 bcm, while production slipped by 0.9 bcm (19%) y/y to 3.9 bcm. Dutch exports to Germany and Belgium stepped down on lower output, and this, alongside a tighter NBP-TTF basis, saw exports to the UK fall to almost zero. Total French consumption fell by a hefty 0.67 bcm y/y to 3.94 bcm, while demand in Belgium slipped by a chunky 0.24 bcm to 1.51 bcm. In terms of storage, Belgium, France and the Netherlands withdrew a combined 1.04 bcm of gas over the month. As of 1 April, gas inventories across the three countries were lower than last year by around 1.25 bcm (20%). For summer 2017, we are forecasting that gas demand from the trio will be up by 2.05 bcm, supported by higher demand for power generation given ongoing French nuclear issues and low hydro reservoir levels.
Implied German demand fell by 1.45 bcm (14%) y/y to 8.77 bcm in March, while strong imports more than offset high exports, leaving net imports at 8.92 bcm, up by 0.13 bcm y/y. Despite a slight rise in demand from power, high net imports still enabled Germany to make net injections last month. German stocks stood at 7.2 bcm by 8 April, lower y/y by 4.7 bcm. Germany would need to inject over 11 bcm this summer to reach the 22.9 bcm stocks seen on 1 October 2016.
Weak demand helped stocks in the Baumgarten region end the winter lower y/y by 1.70 bcm—at 5.10 bcm—compared to a y/y shortfall of 1.95 bcm at the end of February. Last month’s stockdraw eased despite total Russian exports to Europe being 0.20 bcm lower y/y at 12.15 bcm. Baumgarten will need to inject 16.6 bcm (1.70 bcm more than injected in summer 2016) for stocks to reach their 1 October 2016 level of 21.6 bcm. Ukraine will need to inject 6.2 bcm to reach the 14.1 bcm of storage with which it began last winter, 1.10 bcm more than last year.
Gas demand in Spain slipped by 30 mcm y/y to 2.51 bcm in March and fell by a larger 0.64 bcm y/y to 6.22 bcm in Italy. Looking forward, the combination of lower Spanish and Italian hydro levels, the continued loss of French nuclear and hydro, and more competitively priced gas mean that we are still supportive of gas demand in both countries.