We are delighted to present our new Monthly publications, formerly known as Data Review, which will share our short-term forecasts. Please note that users licensed for the data service can access our continental gas balances by clicking here.
We forecast that demand in continental Northwest Europe (the Netherlands, Belgium, France and Germany) will fall by about 2.6 bcm (13%) y/y in November amid mild weather and higher French nuclear generation. Paired with another several weeks of very high LNG receipts, the region should preserve stocks, leading NW Europe to increase its y/y storage surplus by month-end, especially given the strong withdrawal during a cold November 2017. The TTF curve has been priced down on this bearish start to November, but there is a lot of winter still to come, and we see more upside than down to come.
There were signals heading into October presaging a tight winter supply-demand balance in Northwest continental Europe, including sluggish pipeline flows, forecasts for colder-than-average weather and a persistent y/y storage deficit. But a record high 1.2 bcm y/y hike in LNG sendout eased the tightness and allowed the region to post a y/y storage surplus by month-end. The more relaxed demand side, as well as falling carbon prices, helped to take support away from the TTF flat price, allowing the November TTF contract to drop by 13% m/m over October.
The TTF has started November in a fairly bearish mood, and Dec-18 has started trading where we had been looking for winter lows. Very low expected LDZ demand over the first two-thirds of November point to considerable 2.6 bcm y/y reductions in demand across the continental NW European markets. Carbon has also been volatile, falling for much of the last few weeks, but then rebounding after having hit 15.10 €/t, dragging the TTF flat price up with it. While flat prices in relative terms have softened so far, it is too early to be pricing so much weather risk out of the market. Right now, there does seem more upside than downside to the winter TTF curve.
One key demand variable (ex. weather) will be underlying demand for thermal power generation in the region, as it remains unclear as to how much nuclear capacity will return in the next two months. A notable 7 GW y/y rise in French nuclear capacity in Ocotber was one of the primary reasons why gas into power was softer last month, and so far the schedule suggests nearly another 9 GW y/y will be available on average in November. In Belgium, the maintenance schedule is largely unchanged m/m, with the expectation that there will still be around 4 GW of nuclear capacity offline at the end of November. Still-low Nordic hydro reservoirs will tighten up that power market, but even then the call on gas-fired power will still be somewhat tepid.
|Fig 1: Unavailable French nuclear cap, GW||Fig 2: Weekly LNG port receipts, bcm|
|Source: RTE, Energy Aspects||Source: Kpler, Energy Aspects|