Hot weather supported aggregate power demand across Europe last month. Power sector gas demand in Northwest Europe then found support from low nuclear availability before shrinking in Spain and Italy due to higher hydro generation. Total Russian deliveries were softer y/y while LNG supply remained scarce, resulting in lower y/y storage injections and widening the storage gap. A return to mean temperatures should see y/y declines in Q4 18 res-com consumption across Europe. Northwest European power sector gas demand should also ease as seasonally normal weather cuts total power consumption, as well as higher y/y French nuclear availability curbing thermal demand. Stronger Alpine and Spanish hydro generation, owing to healthier stock levels, should cut Q4 18 power sector gas demand in Spain and Italy.
In August, total UK end-user demand was down by 60 mcm y/y, at 3.4 bcm, due to lower LDZ demand caused by hot weather. Looking ahead into Q4 18, we expect end-user demand to fall by 0.9 bcm y/y (4%) provided that the weather is seasonally normal, leaving gas demand lower y/y. We also expect gas into power to fall by 0.31 bcm (4%).
Total gas consumption across Netherlands, Belgium, France and Germany was up by 0.45 bcm y/y, to 8.7 bcm, as higher power demand, low nuclear availability and low imports of Nordic hydro power pushed gas into the generation mix. While total nuclear outages in the region will continue to support thermal generation through Q4 18, we forecast total demand to fall by 2.2 bcm y/y, assuming mean-reverting temperatures cut res-com demand against a colder-than-average Q4 17 base.
Regional gas demand in Central Eastern Europe (CEE) rose by 0.33 bcm y/y to 1.93 bcm in August. Exceptionally high temperatures for this time of year should curb any late-September heating demand, especially compared to last September’s high HDD base.
Total August Spanish gas demand fell by 0.18 bcm (8%) y/y, with higher hydro (+80% y/y) continuing to push gas-fired output from the generation mix. Total Italian gas demand was largely flat y/y in August at 3.9 bcm, with a modest 1% y/y drop in power generation. For Q4 18, we expect total gas demand to fall by a combined 1.65 bcm y/y, to 30 bcm, assuming a reversion to mean temperatures.
In terms of European imports, Russian flows into the region were softer by 0.35 bcm (-2.4%) y/y to 13.74 bcm, which could be a result of downstream pipeline maintenance. Regarding expectations of softer gas consumption across Europe, assuming a return to normal weather, we forecast Russian exports to edge down by 1.7 bcm y/y to 41.9 bcm in Q4 18. As the wide JKM-TTF spreads continued to route cargoes into Asia, LNG supply into Europe dropped by 0.91 bcm (21%) y/y in August, and we expect the same dynamics across Q4 18, with the EU to import 0.3 bcm less of LNG y/y. North African imports into Europe were up by 0.28 bcm y/y in August and will record a 1.4 bcm growth y/y in Q4 18. Across the period, Spain will look to Algerian supply to close its 0.13 bcm y/y storage gap, while North African exports into Italy will also increase as the wider Baumgarten market has a hefty 1 bcm y/y storage gap to close, limiting exports of Russian gas into Italy.