Hot weather and low nuclear generation capacity boosted gas into power last month across Northwest Europe, leaving aggregate gas demand higher y/y despite lower res-com consumption and contributing to a weaker stockbuild y/y. Demand dynamics were much different in the Mediterranean, where weather was more seasonally normal in Italy and much higher hydro generation in Spain left total gas demand lower y/y. In Northwest Europe, the system balanced with stronger UKCS and Russian pipeline supply, helping offset a hefty y/y drop in LNG sendout that we expect to continue well into Q4 18.
Total UK consumption was 3.44 bcm last month (-60 mcm y/y) as lower res-com and industrial demand offset higher gas into power. Gas-fired generation received a boost from low nuclear generation, which fell by 0.32 TWh y/y (5%), the same amount by which gas-fired output rose y/y. Total supply to end users rose by 0.4 bcm y/y (10%) to 3.91 bcm as strong UKCS take offset drops in Norwegian and LNG supply. UK stocks ended the month at 1.1 bcm, down by just 48 mcm y/y.
In contrast, a small y/y drop in res-com demand was unable to offset a rise in power sector gas demand in continental NW Europe, which rose because of low nuclear availability. Total power sector gas demand in Belgium, Germany and France rose by 0.19 bcm y/y to 1.15 bcm. Dutch industrial gas demand—which includes the power sector—rose by a hefty 0.25 bcm y/y to 1.47 bcm. Total Russian supply into Europe fell last month by 0.35 bcm (3%) y/y, owing to a sharp drop in Ukrainian transit, but Russian flows into NW Europe remained stronger y/y, helping the region offset a sharp drop in Dutch supply and LNG sendout. NW Europe posted a 7.2 bcm stockbuild in August, 0.26 bcm more y/y, leaving the regional storage gap at 2.6 bcm by 1 September. But the total y/y European storage gap widened to 3.6 bcm from 2.7 bcm a month earlier as lower Russian supply into Central Europe slowed the Baumgarten stockbuild to 2.9 bcm (-1.1 bcm y/y).
Aggregate gas demand in Spain fell by 0.10 bcm y/y to 2.09 bcm last month as higher hydro generation pushed gas out of the generation mix. Hydro generation has been higher y/y since January, but Spanish reservoir levels were still 9% above the past 10-year average by the end of August. Pipeline supply was 0.16 bcm higher y/y at 1.06 bcm owing to higher Algerian take, helping offset a chunky 0.25 bcm y/y decline in LNG sendout to 1 bcm.
Total Italian gas demand was largely flat y/y in August, with a more modest 1% y/y drop in power generation compared with the 5% y/y decline in July. LNG sendout fell by 0.19 bcm y/y to 0.63 bcm, but the drop was partially offset by a 0.17 bcm increase in net pipeline supply owing to strong North African imports.
|Fig 1: European consumption and end-user supply, bcm|
|Source: Country SOs, GIE, Energy Aspects|