Gas demand in the region was down y/y by 0.23 bcm (11%) to 1.9 bcm in May. Except for Hungary, all countries in the region saw weaker demand, as the warm start to May dented any late-season heating demand. Storage injections in the Baumgarten zone were around 8.0 bcm, some 0.31 bcm higher y/y. While CEE now has higher y/y stocks, June and July should continue to see solid injection rates, particularly in July, when Nord Stream’s closure for maintenance is likely to push more Russian gas through Velke Kapusany.
In the first half of June, weather in the CEE region was unseasonable warm, and while temperatures on 15-30 June are forecast to be closer to normal, CDDs are expected to be around 35% higher y/y for the month. While CEE has modest levels of gas-fired generation and limited air cooling demand at the best of times, we expect that June gas demand will rise by 0.3 bcm y/y. As such, while June injections should still be strong, they should fall by about 0.2 bcm y/y.
Aggregate Russian receipts were up by 4% y/y at 13.9 bcm last month, as higher y/y Nord Stream deliveries offset a y/y drop in volumes transiting via Ukraine. Once again, it was these Russian volumes that supported a brisk Baumgarten stockbuild, which was 0.31 bcm higher y/y at 8 bcm. As a result, the CEE region’s y/y storage surplus grew to 1 bcm by 1 June, from 0.7 bcm a month earlier. This is in contrast to a 4 bcm y/y storage deficit in NW Europe in early June.
These supply dynamics are expected to remain in play this summer, which should continue to support Baumgarten injections. Russian flows into Germany will drop in July, when the Nord Stream pipeline is scheduled to be offline on the 17-31 July gas days. But there is some room to partially offset lost flows by ramping up Yamal pipeline transit through Slovakia. Velke Kapusany flows averaged just under 0.15 bcm/d from 1-11 June, about 55 mcm/d below the pipeline’s nameplate capacity of about 0.20 bcm/d, giving it scope to replace a significant portion of the 0.11 bcm/d of Russian flows that were delivered to Greifswald over the period. Downstream at the Austrian/Slovak border, flows into Baumgarten have averaged around 94 mcm/d so far in June, broadly flat y/y. If flows remain unchanged in July, it would leave just over 0.10 bcm of Slovak gas to route into the Czech Republic through Lanzhot—which has been in reverse flow mode since early May—and onward to Germany. However, Baumgarten flows averaged 74 mcm/d in the second half of July 2017. If Baumgarten receipts edge down to similar y/y levels during the Nord Stream outage, that would leave another 20 mcm/d, or 0.12 bcm/d in total, to be sent into the Czech Republic, and onward into Germany. However, gross Czech exports into Germany have rarely exceeded 90 mcm/d.
As NW European supply remains constrained by low NW Europe supply (Norway, UKCS, and Dutch supply) and Baumgarten stocks continue to post y/y increases, Baumgarten price differentials to NW European hubs should continue to narrow. The AVTP-TTF D+1 basis narrowed to an average of +33 cents/MWh in May, considerably tighter than the 1.44 €/MWh it averaged the same time last year, but not dipping to a discount as we thought possible.
|Fig 1: Planned maintenance constraints in mid-June and July, mcm/d|
|Source: System operators, Energy Aspects|