In June, one of the key developments was the y/y rise in aggregate gas consumption in most European countries. Spain, Italy, Germany and the Netherlands all saw y/y increases, largely driven by higher power sector gas demand. Perhaps reflecting the political mood, the UK was an exception to this continental trend, with UK power sector gas demand stepping down sharply y/y. While UK gas-fired generation was still fully in merit against coal, the call on gas-fired generation fell due to high wind-powered generation and lower aggregate power demand, with the latter at its lowest June level for at least five years, with embedded solar playing a key role.
In other markets, the improved competitiveness of gas compared to coal largely offset lower residential and commercial (res-com) demand. Total demand in Belgium was broadly flat y/y at 0.81 bcm, while aggregate consumption in France was 8% lower y/y at 1.53 bcm, as lower res-com demand was only partially offset by a higher call for gas in the power sector as both hydro and nuclear generation were lower y/y. While French hydro levels have now largely returned to last year’s levels, scheduled nuclear maintenance has taken longer than usual to complete.
The other key markets saw enough power sector gas demand increases to keep the demand side buoyant. Total German implied demand rose by a strong 1.44 bcm (38%) in June to 5.2 bcm, as gas-fired power generation helped compensate for a reduction in French power exports.
The southern markets saw total gas demand increase, with June’s hot and dry weather a key driver in both Spain and Italy, as heightened demand for air cooling supported gas in power and dry weather kept hydro generation levels low and forestalled a recovery in reservoir levels.
Aggregate demand in the Baumgarten region was mixed—lower y/y in Austria and Slovakia, flat in Poland, and higher y/y in Hungary and the Czech Republic.
To meet higher demand, aggregate Russian flows into Europe were up by 0.35 bcm (3%) y/y at 12.97 bcm last month. The strong Russian flows boosted gross imports into Central Europe, although net imports for that region slipped owing to a sharp y/y rise in reverse flows to Ukraine.
Norwegian flows to continental Europe were also considerably stronger y/y in June. A lighter annual summer Norwegian maintenance schedule, as well as annual maintenance on the IUK (Interconnector UK), encouraged Norwegian flows to divert to continental terminals.
While Russian and Norwegian gas were meeting higher demand, LNG sendout had mixed results. Regasification was lower y/y in Belgium, France and the UK, though it was higher y/y in Spain, Italy, and the Netherlands. Italian sendout was up by 99 mcm in June, but Spanish regas grew the most, by 0.39 bcm y/y, though some of that was required in order to offset a drop in Algerian pipeline imports. At current levels, Spain is on track to take some 2.5 bcm more LNG than last year in Q3, which is just under half of all the incremental LNG we expect to arrive in Europe that quarter.