The EU market balanced in August through higher overall imports, with increased supply from Russia and LNG more than offsetting the reductions in imports from North Africa.
EU imports of Russian gas in August were up by 3.3 bcm (31%) y/y at 14.1 bcm, which is also 9% higher m/m, data from system operators (SOs) indicated. High levels of European imports of Russian gas was driven by an acceleration in storage injections in continental Europe, particularly in eastern markets feeding into Baumgarten. Over the first eight months of 2017, EU imports of Russian gas were up by 10.8 bcm y/y.
Total Russian gas production in August was reported as 8.7 bcm (19%) higher y/y at a healthy 54.2 bcm. Gazprom’s output stayed strong in August, 7.95 bcm (24%) higher y/y, accounting for most of the y/y increase. While production flow rates, at 1.34 bcm/d still reflects the seasonal softness driven by field maintenance, this was up 0.1 bcm/d m/m. Over the first eight months of 2017, Gazprom production was up by 52.1 bcm y/y, an 18% y/y gain.
In August, total North African exports to the European market continued to drop, falling y/y by 1.67 bcm y/y. Libyan imports into Italy were lower y/y by 61 mcm (16%), while Algerian flows into Italy also recorded another chunky y/y decline of 0.89 bcm (52%) to 0.82 bcm. Algerian flows into Spain were also down, by 0.72 bcm (51%) y/y, at 0.7 bcm, lower y/y for the fifth straight month.
Over April-August, Algerian imports into Europe were down by 5.3 bcm y/y, with both Spain and Italy swapping out Algerian volumes for pipeline gas from other sources and LNG. While oil-indexed Algerian gas prices will have come down due to the 6% m/m drop in oil prices which occurred between February and March this year, these contracts remain out of the money against both European hub prices and global LNG prices. The experience of the last five months for Algeria will underline the importance of adjusting its contract pricing if it does not want to lose further market share to LNG.
LNG imports to the Western European markets were up by 0.73 bcm y/y in August. Imports into both Belgium and the UK were down by a combined 0.17 bcm y/y, driven by the NBP spending most of the month at a discount to other European markets. But the decrease in LNG supply to Belgium and the UK was more than offset by increases in Southern Europe, where LNG imports were up by 1.26 bcm y/y, with Italy adding 0.6 bcm y/y, Spain adding 0.36 bcm y/y and France adding 0.3 bcm y/y.