Mild weather and high renewable and hydro generation cut gas demand across most of Europe in April, while strong Russian flows offset lower Dutch and Norwegian supply, helping narrow the y/y storage gap. European stocks stood at 24.2 bcm on 1 May, down by 7.1 bcm y/y, compared to an 8.9 bcm gap on 1 April. The deficit has eased further, to 3.6 bcm by 12 May, thanks to continued warm weather and large injections due to strong Norwegian flows in May.
Total Dutch consumption was 2.6 bcm in April (-0.5 bcm, 16% y/y) driven by reductions in res-com demand (-0.36 bcm, 23% y/y). Gas demand in Belgium stepped down by a sizeable 0.26 bcm (19%) y/y as heating demand fell by 0.14 bcm (21%) y/y along with power sector gas demand (-0.13 bcm, 36% y/y) due to stronger nuclear generation. Aggregate French demand was 0.5 bcm (17%) lower y/y as big increases in hydro generation curbed power sector gas demand (-0.29 bcm, 84% y/y) and mild weather cut heating consumption (-0.24 bcm, 14% y/y). Over summer 2018, we forecast demand will fall across all three countries—0.18 bcm (1%) y/y in Netherlands, 1.1 bcm (10%) in France and 0.25 bcm (4%) y/y in Belgium—owing to stronger French nuclear generation and alpine hydro availability as well as potentially more wind generation.
German HDDs were down by 47% y/y in April and were the lowest in at least 10 years. According to system operator data, total L-gas demand in Germany fell by 0.57 (31%) bcm y/y to 1.27 bcm, while H-gas demand dropped by 1.20 bcm (23%) bcm y/y to 4.6 bcm. Exceptionally mild weather also cut gas demand across Central Europe in April, encouraging a heavy stockbuild and eliminating the y/y storage deficit in the region. Baumgarten stocks stood at 6.5 bcm on 1 May, up by 0.68 bcm y/y, compared to the 0.5 bcm y/y deficit at the start of April.
In contrast, very cold weather on several days in April helped boost aggregate heating demand in the UK by 0.4 bcm y/y (11%), bringing total gas consumption up by 0.4 bcm (7%) y/y. For the rest of summer 2018, we forecast end-user demand in the UK to be down by 0.14 bcm (1%) y/y as y/y increases in renewable generation cut thermal generation and strong demand for European storage injections buoys prices, pushing gas generation out of merit order.
Cold weather increased heating gas demand in Spain and Italy, but strong hydro generation limited power sector gas burn. Total Spanish gas demand was up by 0.25 bcm (7%) y/y on stronger non-power gas demand (+0.25 bcm, 13% y/y). Total Italian demand slid by 47 mcm y/y to 4.67 bcm as power sector gas burn fell by 0.26 bcm (15%) y/y, offsetting growth elsewhere. We forecast summer end-user gas demand to drop in Spain (-0.17 bcm, 1%) and Italy (-0.6 bcm, 2.3%) as replenished hydro stocks and strong injection demand cuts power sector gas burn.
Strong injection demand in April supported a 0.79 bcm y/y increase, to 21.58 bcm, in total EU gas imports. Total Russian flows into Europe jumped by 1.61 bcm (12%) y/y to 15 bcm, just shy of last month’s record 15.4 bcm take. North African pipeline exports into Europe slowed in April (-0.29 bcm y/y to 2.62 bcm) as Algerian exports into Italy stepped down by 0.40 bcm y/y to 1.16 bcm. Libyan exports into Italy declined by 0.29 bcm y/y to just 13.7 mcm due to GreenStream flows being halted amid maintenance. LNG sendout in Europe eased y/y by 0.5 bcm (12%) to 3.9 bcm as terminals replenished stocks.