Another month of unusually cold weather across Europe supported higher res-com demand and strong storage withdrawals in March. Russian gas exports into Europe reached a record high while Dutch output marked the first month of higher y/y output since September 2016 (+0.14 bcm, 4% y/y). Total Norwegian imports shrank by 0.3 bcm (3%) y/y, while unplanned outages reduced UKCS flows. Strong Northeast Asian demand limited European LNG receipts.
Aggregate UK consumption was up by 1.7 bcm (24%) y/y at 8.9 bcm, driven by a 1.8 bcm (35%) increase in LDZ demand. Power sector gas demand inched down by 20 mcm y/y (1%) on higher generation from coal and wind. With gas prices needing to prioritise storage injections over gas burn for power, we expect end-user demand in Q2 18 to be down by 0.14 bcm (1%). In the Netherlands and Belgium, strong heating demand drove total gas demand higher by 1 bcm (28%) and 0.4 bcm (26%) y/y respectively. While res-com consumption expanded in France (+0.5 bcm, 21% y/y), total demand edged down by 0.3 bcm (7%) y/y to 3.7 bcm on lower industrial demand. Assuming mean-reverting temperatures, we expect combined end-user demand in Belgium, the Netherlands and France to be just 20 mcm higher y/y in April.
Total Spanish gas demand increased by 0.26 bcm (10%) as non-power sector consumption accounted for all the growth. Strong hydro and record high wind generation pushed Spanish power sector gas burn slightly lower, by 2% y/y to 0.29 bcm. Total gas consumption in Italy stepped up by 1.74 bcm (27%) to 4.93 bcm as res-com demand was 1.67 bcm (51%) higher y/y. For April, we expect Spanish gas demand to decrease by 0.02 bcm (1.0%) y/y given a stronger outlook for hydro generation on rising reservoir levels. In Italy, mean-reverting temperatures and higher hydro levels lead us to expect that gas demand will rise by only 0.08 bcm (1.0%) y/y.
The European y/y storage gap widened further to 9.36 bcm by month-end from 1.30 bcm at the start of March. Total European withdrawals from storage totalled 10.55 bcm, a chunky 8.06 bcm more compared to a year earlier. The highest withdrawals were made in Germany (2.7 bcm versus a net injection of 0.26 bcm last year) and the Baumgarten region (3.17 bcm, 2.04 bcm more y/y), where the bulk of demand was met with gas from storage.
In terms of pipeline imports, Russian exports into Europe climbed by 3.20 bcm (26%) y/y to a record high of 15.36 bcm. Combined North African exports to Italy and Spain grew by 0.24 bcm (6%) y/y to 4.17 bcm, with flows into Spain accounting for most of the increase (+0.23 bcm, 17% y/y).
In Europe as a whole, LNG sendout was down because of the tightness in the global LNG market, driven by the very cold January and February in NE Asia that led to considerable buying for stockbuild in that region. Total LNG sendout in Europe slowed by 0.66 bcm (15%) y/y to 3.68 bcm, led by sharp y/y decreases in the UK (-0.29 bcm, 38%), Spain (-0.19 bcm, 16%), Greece (-0.18 bcm, 90%) and France (-0.17 bcm, 17%). There was, however, increased LNG sendout in some countries. Sendout in Italy totalled 0.73 bcm, 0.19 bcm (3%) higher y/y. Regasification also rose in Poland, albeit on a low base, by 90 mcm (63%), the highest monthly volume since the terminal there came online in 2016.