We are pleased to launch our new monthly report, the EU imports data review.
The EU market balanced in June with lower overall imports as higher imports from Russia and via LNG could not fully offset the reductions in imports from North Africa.
In June, data from SOs indicate that EU imports of Russian gas were up by 0.35 bcm (3%) y/y at 12.97 bcm, which was softer m/m. Despite the m/m easing, import data reflect still decent incremental demand for Russian gas, as Europe looks to rebuild storage levels drained over winter. Over H1 2017, EU imports of Russian gas were up by 6.4 bcm y/y.
Total Russian gas production in June was reported at 51.2 bcm, higher y/y by 8.7 bcm (21%). Accounting for all this output increase was Gazprom, which registered y/y production growth of 9.1 bcm (30%). Flow rates were the lowest for 2017 so far, at 1.3 bcm/d, with this likely because June usually sees Gazprom’s lowest output levels as the company tends to focus on maintenance. Over H1 2017, Gazprom production is up by 37.3 bcm y/y.
In June, total North African exports to the European market were down y/y by 1.34 bcm. Libyan imports into Italy fell by 46 mcm (10%) y/y, while Algerian flows into Italy also recorded another chunky y/y decline, falling by 0.83 bcm (48%) to 0.97 bcm. Algerian imports into Spain also fell, by 0.46 bcm (34%) y/y at 1.08 bcm, down y/y for the third straight month.
Over Q2 17, Algerian imports into Europe were down by 2.5 bcm y/y—a sizeable drop that is completely at odds with the intentions of the Algerian government. We think the main reason for this is that Algerian contracts, while renegotiated in Italy by ENI, likely retain some remaining degree of oil indexation. With oil prices up by 16% between November and December 2016, a five-month lag would result in higher prices under the contract from April, which is when we saw the first y/y reductions. That lag in pricing has thus had a big impact extending through Q2. European takes from Algeria in Q3 might be a little less affected, given the 6% m/m drop in oil prices that occurred between February and March. However, given low prevailing hub prices and more LNG availability, those volumes are still at risk.
LNG imports to the Western European markets were up y/y by 0.5 bcm in June. Imports into both Belgium and the UK were down by a combined 0.14 bcm y/y, largely driven by the NBP spending most of the month at a discount to other European markets. However, these losses were more than offset by increases in Southern Europe, where LNG supplies were up by 0.49 bcm y/y, with Spain adding 0.4 bcm y/y and Italy adding the rest.