End-user gas demand was higher y/y across most European hubs in September. In Northwest Europe, below-average temperatures boosted res-com demand, offsetting a drop in power sector gas demand caused by high wind generation. In contrast, low hydro generation in Spain and Italy continued to support gas use in power generation.
UK consumption was up by 0.4 bcm y/y at 4.2 bcm last month. LDZ demand rose by 0.53 bcm y/y to 2.4 bcm—the largest y/y increase since January. Power sector gas demand fell by 0.13 bcm y/y to 1.5 bcm. Aggregate supply to the UK was 0.10 bcm lower y/y at 5.64 bcm, as higher Norwegian and UKCS pipeline supply only partially offset slower LNG sendout. UK LNG sendout posted its largest monthly y/y decline since February, as higher LNG spot prices in Asia pulled uncommitted Qatari supply away from the UK, and tight southern European markets attracted the bulk of Europe-bound LNG. This winter, we expect UK demand to drop by 1.2 bcm y/y in Q4 17 before rising by 0.49 bcm y/y in Q1 18—both based on reversions back to mean temperatures. We expect the UK to import only 0.95 bcm (3%) more LNG y/y, due to higher assumed Asian takes and higher continued demand from the southern markets.
Similar supply and demand dynamics occurred in the Netherlands, Belgium and France last month. HDDs in these countries increased y/y by an average of around 150%, causing a sharp jump in res-com demand that offset lower power sector demand. The reductions were led by France, as power sector gas demand fell by a chunky 0.15 bcm to 0.31 bcm, while in Belgium gas-fired generation fell by 0.22 TWh y/y to 1.15 TWh. Norwegian exports to the region were much higher y/y, but LNG sendout was down sharply y/y in France and Belgium, and just a touch higher y/y in the Netherlands. For Q4 17, we expect demand across the three countries will fall by 1.2 bcm y/y, but we then expect growth of 0.25 bcm y/y in Q1 18—both changes are driven by an assumed return to seasonally normal weather. French gas demand in Q1 18 is expected to drop as we expect nuclear outages to be less heavy y/y, but extensions to outages remain a real risk.
Spanish gas consumption was 2.27 bcm in September, with power sector gas demand up by 0.19 bcm (44%) y/y owing to low hydro and coal-fired generation. Hydro stocks finished summer at a 14-year low. Italian gas demand was lower y/y at 4.25 bcm, led by a 0.45 bcm (20%) y/y fall in power sector gas use. On the supply side, LNG sendout in both countries continued to rise y/y as net pipeline supply fell. For Q4 17, we now expect total gas demand to grow by 0.7 bcm y/y in Spain and Italy combined. Q1 18 could still see modest growth in gas demand—even if there is a reversion to mean temperatures—due to low hydro stocks, with demand up by 1.2 bcm y/y.
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. 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 Baumgarten region, while Q1 18 would see a drop of 2.0 bcm y/y.