Strong Russian flows boosted gross imports into Central Europe last month, but net imports slipped owing to a sharp y/y increase in reverse flows to Ukraine.
Aggregate Russian flows into Europe were up by 0.35 bcm (3%) y/y at 12.97 bcm last month thanks to strong flows through all entry points other than Poland. Flows through Poland stopped in late June owing to a gas quality issue but resumed within a few days.
Net imports into Slovakia slipped by 50 mcm y/y (10%) as high imports were offset by slightly stronger exports. Russian exports to Slovakia via Ukraine rose by 0.91 bcm (24%) to 4.69 bcm, while reverse flows into Ukraine were 0.71 bcm, having been nearly zero in June 2016. Russian flows from Slovakia into Austria grew y/y by 0.15 bcm at 3.70 bcm, but net exports from Austria to its neighbours were even stronger, leaving net imports down by 0.38 bcm (24%) y/y. Exports to Hungary were up by 39% y/y 0.40 bcm, just shy of the record 0.42 bcm exported in August 2014. Total net imports into the Czech Republic rose by 80 mcm (8%) to 1.09 bcm because of sharply lower gross exports, though gross imports also fell last month. Hungary’s net imports rose by 0.90 bcm (14%) y/y owing to high flows from both Ukraine and Austria. Net imports to Poland dropped by 0.16 bcm (12%) to 1.07 bcm in June, owing to slower exports on to Germany.
Aggregate stocks in the Baumgarten region posted a 2.9 bcm stockbuild, 0.20 bcm less y/y. The slowdown was mostly in Austria, where stocks increased by 0.75 bcm in June, 0.25 bcm less y/y. Baumgarten stocks stood at 11 bcm by 1 July, 2.8 bcm lower y/y, while Ukrainian stocks finished June at 11.6 bcm, up by 1.05 bcm y/y.
The TTF-AVTP D+1 basis averaged -1.56 €/MWh in June, out from -1.43 €/MWh in May. Strong demand for reverse flows into Ukraine that lowered net imports into the region may have provided some support for AVTP prices, pushing them further above those at the TTF and thus discouraging injections in Austria and Hungary. The TTF-AVTP M+1 basis also widened in June, averaging -1.60 €/MWh compared to -1.26 €/MWh in May.
Russian flows are also expected to remain higher y/y for the rest of this quarter, which should keep Central Europe well supplied, while the need for storage injections will support the market. Gas will still be needed for export to Ukraine, while forecasts of hot weather and the resulting boost to power demand will keep the AVTP at a healthy premium to the TTF.