Some scorching hot weather in the CE region (CDDs up as much as 73% y/y) buoyed demand by 0.44 bcm (22%) y/y in June, curbing injections by 0.15 bcm y/y. Weather forecasts suggest that CDDs across July will be at least 9% higher y/y, which would mean less y/y (and m/m) demand push from the region relative to last month. Also, with a prevailing storage overhang still in place, the demand side of the ledger should remain comfortable in July. If we do see the AVTP go to a discount to the TTF, it could well be during the coming two weeks when the Nord Stream pipe goes offline for maintenance, pushing more Russian gas through CEE hubs.
Aggregate implied gas demand in the Baumgarten region rose by a considerable 0.44 bcm (22%) y/y last month. Cooling demand played a role, with CDDs in the region higher y/y and as much as 70% above the past five-year average. Storage injections eased by 0.15 bcm y/y to 2.85 bcm, narrowing the y/y storage surplus to 0.86 bcm. For July, an easing of CDDs should help loosen the balances.
Strong Russian flows into Europe supported CE injections in Q2, helping the region post a mid-summer storage surplus compared with Northwest Europe’s 3 bcm y/y storage gap. Aggregate Russian receipts into Europe were up by a sizable 2.1 bcm (16%) y/y in June, with flows higher at most entry points except those to Romania and Slovakia, with the latter seeing receipts down y/y owing to planned maintenance cutting flows at Velke Kapusany.
Russian flows in the region, including transit flows, could see some geographical shifts in July, with plenty of maintenance planned. The heaviest Russian flow constraints will occur in the second half of July, with Nord Stream capacity cut by 42% on the 17-18 July gas days and by 100% on the 19-31 July gas days. As we said last month (see Data review: CEE, 14 June 2018), increasing transit through Yamal should help offset much of the lost Nord Stream supply, although aggregate Russian supply into Europe should still ultimately slow in m/m terms. Delivery capacity into Germany from Poland via Mallnow was cut by 7-26 mcm/d on 2-6 July, but flows averaged just 9 mcm/d lower y/y. There is a full shutdown scheduled at Mallnow on the 9, 10, 11 and 13 July gas days. During recent maintenance events, we have seen the impact of Russian maintenance muted by deliveries increasing both before and after the outages. For instance, the Mallnow point had maintenance constraints through most of the second half of June, but receipts were still broadly flat y/y owing to higher y/y flows in the first half of the month. As such, over July, total flows may well largely be unchanged through this entry point. Also, with Nord Stream offline, flows through Mallnow would nevertheless be expected to increase.
The AVTP-TTF D+1 basis averaged 36 cents/MWh last month, a much smaller premium than the 1.56 €/MWh it averaged in June 2017. As the y/y storage surplus at Baumgarten continues to expand relative to Northwest Europe’s 2.0 bcm storage deficit, that basis should continue to narrow. In addition, increasing continental transit to offset lost Nord Stream supply is also likely to further lower that basis premium, with an AVTP discount a possibility on the D+1 contract while that pipe is offline.
|Fig 1: Planned maintenance constraints in mid-July and August, mcm/d|
|Source: System operators, Energy Aspects|