The end-of-month contract roll and forecasts for colder weather in December supported NBP and continental near-curve gas prices last week. Continued support should come from another expected cold snap ahead, low LNG sendout and tighter Norwegian supply because of outages.
Norwegian flows were strong on Monday morning, at about 0.35 bcm/d, and we expect them to remain broadly around that rate before dropping next week because of scheduled maintenance. However, the 30 mcm/d of capacity constraints are only scheduled for the 12 December gas day. Given the wave of cold weather forecast to arrive by 9 December, we expect nominations of Norwegian flows will be strong outside of that curtailment.
We expect UKCS flows will remain higher y/y for the next two weeks. Dutch flows may ease slightly over the next few days, as temperatures in NW Europe move broadly in line with the seasonal norm, but could rise again by the weekend as unseasonable cold arrives. Russian flows edged up by about 5 mcm/d from the week of 20-27 November to just over 0.20 bcm/d by the weekend of 2-3 December and we expect them to remain at that rate this week, before rising again by the weekend of 9-10 December as customers increase nominations on that forecast cold snap.
LNG sendout in NW Europe is likely to remain lower y/y this week, as port receipts continue to be slow. Net deliveries are expected to total 0.22 bcm this week, which is 89 mcm less y/y. Sendout could rise in the week ending 17 December, however, as cold weather boosts demand and scheduled imports are scheduled to total 0.34 bcm, up by 0.15 bcm y/y.
We forecast that aggregate demand will be around 1.1 bcm/d this week, a touch lower w/w because of a drop in power sector gas demand caused by high wind generation and improving nuclear availability. In the week ending 17 December, colder weather and a return to more modest renewable generation will boost aggregate demand to about 1.2 bcm/d.
Europe made a net storage withdrawal of 3.9 bcm in the week to 2 December, with stocks down by 2.4 bcm in NW Europe, pulling at a similar pace y/y. This week’s fundamentals should curb the draw to 2 bcm in the week ending 10 December, before colder weather and higher power sector gas demand leads to a draw of about 2.6 bcm in the week through 17 December.
By Monday morning, the TTF D+1 was changing hands 1.62 €/MWh above the 15% trigger of 20.1 €/MWh, pushing the market up towards the 20% trigger of around 22.3 €/MWh. With aggregate European stocks above 78 bcm, inventories are comfortable, although a storage call of 2 bcm next week suggests M+1 prices might not stop rising until after another 60-70 cents is added.
|Supply-Demand outlook and storage forecast for NW Europe, mcm|
|Source: Country SOs, GSE, Energy Aspects|