For the region as a whole, we expect gas demand to drop by 0.14 bcm y/y in June, due largely to French and German power sector gas demand weakness. Higher French nuclear availability and alpine hydro levels will remain headwinds, although some support could come from lower wind generation and the drop in Nordic hydro levels from a hot and dry May. For Q3 18, similar trends are expected with gas demand dropping by 1.4 bcm y/y, with the same risks. The key for Q3 18 will be just how hot it gets, as a sustained period of hot and calm weather will improve opportunities for thermal power generation.
Aggregate demand across the region dropped by 1.6 bcm y/y in May, with res-com dented by a warm start to the shoulder month and power sector gas demand curbed by strong renewable generation. For the rest of the summer, renewables’ share of the generation mix and levels of nuclear availability will be the strongest factors affecting gas demand.
For June, expected higher hydro levels, greater nuclear availability and increased wind capacity will continue to ease the need for gas-fired power generation in France. In Germany, gas-fired generation is likely to continue to fall with the planned return to service of 2.7 GW of nuclear capacity, as well as the 5 GW rise in German wind capacity added over the past year. In contrast, Belgium could see an easing of y/y declines in gas-fired generation given the heavy slate of planned nuclear outages in the next few months. That said, this will depend on how much of the lost nuclear output is made up by renewables.
We forecast that Russian supply this summer will remain the bright spot in the supply mix, as LNG sendout slows with fewer European port receipts and Dutch supply continues to shrink. With aggregate gas inventories in the four countries 3.8 bcm lower y/y as of 1 June, there is still plenty of summer injection demand, which should encourage strong Russian nominations, particularly during the heavier periods of Norwegian maintenance in June and September. Planned Nord Stream maintenance could slow Russian receipts into Germany in July, but that is likely to be offset by higher deliveries through Ukraine. Prolonged delays to the start-up of Australian liquefaction capacity will tighten LNG supply, cutting Northwest European port receipts over the summer months. Dutch supply will continue to shrink y/y, with Groningen production well on track to decline by more than the required 2.4 bcm cut for the 2017 gas year.
|Fig 1: Norwegian summer maintenance, bcm||Fig 2: Groningen production, y/y, bcm|
|Source: Gassco, Energy Aspects||Source: NAM, Energy Aspects|