December 2017 gas demand in Europe was mixed owing to differing weather patterns. Across Northwest Europe and the Mediterranean, a cold first half of December raised LDZ demand, driving aggregate consumption higher y/y. In Germany and the Baumgarten region, LDZ demand shrank on warmer-than-normal weather, which led to a 0.20 bcm (2%) decrease in total German demand and widened the y/y storage surplus in Baumgarten.
In the UK, aggregate end-user gas demand was 8.81 bcm in December, up by 0.29 bcm (3%) y/y owing to heightened res-com demand on a cold first half of the month. The three-week outage on the Forties Pipeline System, coupled with lower temperatures, kept the UK system tight over the month. We forecast UK end-user demand will be 0.68 bcm higher y/y over Q1 18, assuming a reversion to normal weather patterns. On the continent, relatively cold December weather led to aggregate gas demand growing by 10 mcm (1%) in Belgium and by 0.23 bcm (6%) in the Netherlands, while stronger wind and nuclear generation in France cut gas demand by 0.11 bcm (2%) y/y. We project that aggregate demand across the three countries will rise by a combined 0.20 bcm y/y to 33.9 bcm in Q1 18, assuming seasonally normal temperatures and a y/y rise in nuclear availability in France.
Spanish and Italian total gas demand was 0.22 bcm (7%) and 0.24 bcm (3%) higher y/y respectively last month, owing to higher heating demand. Such growth more than offset a drop in power sector gas demand, which shrank in both countries as record-high wind generation eroded the call on thermal power, despite low hydro reservoir levels, particularly in Spain. For Q1 18, we forecast 0.9 bcm (11%) y/y growth in Spanish gas demand on strong demand from power. Our assumption on mean-reverting temperatures would see Italian gas demand 0.2 bcm (1%) y/y higher in Q1 18.
Total Russian flows into Europe were greater by 1.46 bcm (11%) y/y at 14.77 bcm in December. Most of the increase was owing to Gazprom taking advantage of greater OPAL access, with deliveries to Germany up by 1.10 bcm (28%) y/y at a record high of 5 bcm. Strong imports at Velke Kapusany supported a 0.58 bcm (19%) y/y rise in Slovakian exports into Austria, which led to a 0.54 bcm (22%) y/y increase in exports from Austria into Italy. Despite a huge explosion at the Baumgarten compressor station on 12 December, Austrian exports to Italy resumed the next day. Exports from the Netherlands, Belgium and France were higher y/y as a tight UK widened the NBP’s premium to its continental equivalents, supporting IUK and BBL flows. UK pipeline imports from Norway were near capacity throughout the month, and higher y/y Norwegian flows into the Netherlands (+0.17 bcm, 9%) supported a hefty 0.22 bcm (50%) y/y increase in BBL flows to the UK.
In December, total North African exports to the European market fell by 0.13 bcm (2%) despite some tightness in the key southern gas markets of Italy and Spain, pointing to the unattractiveness of Algerian contract prices. According to SO data, LNG sendout into Northwest Europe was up by 0.23 bcm y/y in December 2017, though France was the only European nation to post a y/y increase. The 0.27 bcm y/y hike in France, to 0.67 bcm, more than offset declines elsewhere in the region. In the Mediterranean, Italy increased LNG sendout by 0.09 bcm (21%) y/y to 0.52 bcm, while sendout in Spain was up y/y by 0.05 bcm (3%) to 1.47 bcm.