Our balances are set for lower y/y demand during Q4 18, provided that the weather is no colder than normal. We will likely see this even in September, with current forecasts largely indicating higher y/y temperatures, with res-com demand expected to drop off by 0.11 bcm y/y as a result. On the supply side, we expect a smaller uptick in September UKCS output than seen during July and August, as Rough supply, which added about 0.10 bcm/m in Q3 18, will be absent given that the facility is offline for maintenance. With LNG imports to remain low this month, the market will have to balance by discouraging exports to the continent, which will support an NBP premium to the TTF.
On the demand side, total UK consumption in August was down by 60 mcm y/y as falling res-com demand offset a small rise in power sector gas demand. Going into September, with the summer heat largely over and temperature forecast to be higher y/y, the outlook indicates a reduction in res-com demand y/y. However, given September is a shoulder month, that reduction in res-com demand only amounts to 0.11 bcm over the month. This could well be offset by a rise in power generation as low Nordic hydro stocks and low availability of nuclear power (outside of France) look like they could again slow continental power exports to the UK. In France, if plants fail to come back online as scheduled, nuclear availability will be no higher or even lower than last year. On the flip side, if French nuclear units do come back as scheduled, the associated rise in nuclear generation would be less supportive of UK power sector gas burn.
Aggregate supply looks stronger on healthy UKCS flows, which were up by 0.35 bcm (15%) y/y, although that was boosted by Rough cushion gas sales of 0.10 bcm. Rough production is scheduled to halt in September due to scheduled maintenance before returning in October. However, brisk production elsewhere in the UKCS could continue to improve in September owing to low levels of planned works, which should help UKCS supply grow by 3% y/y.
We expect LNG supply to be down y/y in September and across the coming winter on strong Asian demand. In August, UK LNG sendout fell by 0.30 bcm (64%) y/y, and with the JKM-NBP spreads on the forward curve being consistently wide enough to draw spot LNG to Asia, the UK will continue to see lower y/y port receipts of LNG. With lower LNG supply, the NBP will need to keep balancing as it has done in the last couple of months—by reducing exports through the IUK pipe to Belgium. That will mean that the NBP will need to maintain its premium to the TTF.
The UK made a stockbuild of 0.26 bcm last month, higher by 0.13 bcm y/y. By the start of September, UK stocks stood at 1.13 bcm, or 73% capacity. We expect that the UK will inject another 0.25 bcm in.to storage by the end of September, pushing stocks to near 1.40 bcm. There could be a bit of upside on those numbers if the weather is mild throughout October.