HDDs were up by between 10-90% y/y across all countries in the Baumgarten hub in September, boosting res-com gas demand and supporting higher y/y net imports in all countries except Poland.
Net gas imports into Austria rose by 0.22 bcm (19%) y/y to 1.37 bcm in September, as higher imports from Slovakia and lower exports to Italy helped offset a fall in imports from Germany. Austrian exports to Italy fell by 4% y/y to 2.20 bcm last month, the lowest since March, in part due to maintenance on the TAG pipeline that halted flows at Tarvisio on 25-28 September. Supplies via Germany were lower y/y on colder weather and Nord Stream pipeline maintenance during September, which tightened the supply-demand balance in Northwest Europe, leaving less gas for export to Austria. Stronger Russian flows into Slovakia—and onward into Austria—helped offset some of the fall in Nord Stream flows. Gross Russian exports into Slovakia have been stronger y/y every month since March, while net Russian flows into the country were further bolstered in August and September owing to a drop in reverse flows from Slovakia to Ukraine, a result of Ukrainian stocks being much higher y/y by Q3 17. Ukraine had 2 bcm (15%) more in stock by 1 October.
Total net imports into the Czech Republic were up by 90 mcm (15%) y/y at 0.69 bcm, in part because of a chunky 0.2 bcm (46%) drop in gross exports to Slovakia. Net imports into Hungary jumped by a considerable 0.42 bcm (49%) y/y to 1.28 bcm, supported by strong Russian flows delivered through Ukraine, which were up by 0.77 bcm (113%) y/y at 1.44 bcm and just shy of August’s record high 1.47 bcm. Net imports into Poland slipped by 0.15 bcm (13%) y/y to 0.97 bcm, primarily because of a 0.12 bcm (4%) drop in imports from Belarus.
Countries in the Baumgarten region injected 3.05 bcm into storage in September, starting winter with stock levels of 21.4 bcm, only 0.27 bcm lower y/y. The weather in Central Europe has been colder than normal over the first week of October, and is expected to remain so before turning milder than the seasonal norm by 11 October. The Weather Company outlook for Q4 17 is for the region to predominantly be warmer than normal for the entire quarter.
A tighter supply-demand balance in Central Europe pushed AVTP D+1 prices to close at a premium to the M+1 contract on ten trading days in September. D+1 contracts have closed below the November contract so far in October, which could help encourage some small net injections into storage before the heating season begins in earnest.
For the coming winter, if average temperatures in Q4 17 are warmer than last year (assuming mean reversion on temperatures), we expect to see a 2.2 bcm y/y drop in demand in the region, while Q1 18 would see a drop of 2.0 bcm y/y. The AVTP premium to the TTF will likely be narrower y/y if demand in the CEE region falls, Russian flows through the OPAL increase after the EU granted greater pipeline access, and there is less demand for reverse flows at the Ukraine-Slovakian border point.