A period of warm weather and very high Norwegian supply helped Europe post another large y/y stockbuild last week, cutting the y/y storage gap to just 3.6 bcm. The storage build was helped by total demand across NW Europe being 0.2 bcm/d lower y/y at 0.42 bcm/d in the week to 11 May, with both res-com and power sector gas demand showing y/y declines. Given weather is expected to turn cooler from midweek, we expect demand to rise by a modest 31 mcm/d y/y, averaging about 0.5 bcm/d in the week to 18 May.
But total supply should remain about 51 mcm/d y/y higher at 0.7 bcm—helping offset the uptick in demand—owing to much higher Norwegian and Russian supply. Despite a similar y/y maintenance schedule, Statoil appears to have ramped up flows from flexible fields to help offset lost production from fields undergoing planned maintenance. We expect this to continue at least through the rest of this week, with flows averaging around 0.31 bcm/d, up by about 67 mcm/d y/y. Meanwhile, Russian flows to NW Europe ramped back up, with the end of planned maintenance over the weekend. We expect flows to quicken further in the week through 18 May, up by a chunky 34 mcm/d y/y and back towards the pre-maintenance average level of 0.18 bcm/d. UK flows should increase slightly this week, with lower planned constraints.
NW European terminals posted another strong week of imports last week, but sendout remained lower y/y owing to terminals continuing to build stocks. With inventories now much healthier, we expect that trend could come to an end in the next two weeks, with sendout rising y/y by the end of the month. We expect that aggregate LNG sendout from NW European terminals will be down by 6 mcm/d y/y in the week ending 18 May, but then rise by 2 mcm/d y/y in the following week.
NW Europe injected 1.6 bcm into storage in the week through 4 May, about 0.4 bcm more than we had forecast, due to higher Norwegian supply. The aggregate European stockbuild was 2.7 bcm, 1.5 bcm more y/y, narrowing the y/y storage deficit to 3.6 bcm y/y. CEE storage is building quickly and is now 1.2 bcm higher y/y. We are forecasting a NW European stockbuild of 1.4 bcm in the week through 18 May (+0.30 bcm y/y), although that will be partially offset by the following week’s injection coming in 0.10 bcm lower y/y. We expect the y/y storage gap to be above 3.0 bcm by the end of the month, with most of that deficit in NW Europe.
Given the remaining storage gap, the market is going to keep pricing in the range between the two current fuel switch levels currently sitting at 20.8 €/MWh and 23.1 €/MWh after a week of strong w/w gains in coal (+5.7%) and carbon (+12.4%) prices. With very little likely to shake the gas market out of this trading range, any changes in absolute prices will be driven by changes in the associated markets.
|Supply-demand outlook and storage forecast for NW Europe, mcm|
|Source: Country SOs, GIE, Energy Aspects|