Central Europe experienced a significantly warmer month in December compared to the previous year. As such, gas demand in the region was down y/y by 0.11 bcm (-2%) to 5.45 bcm. All countries, except for Hungary, saw weaker demand.
Storage withdrawals in the Baumgarten zone were around 2.1 bcm in December, more than 1 bcm lower than last December. As of 1 January, inventory levels at all the central European hubs are still considerably lower than last year, now 2.51 bcm (-19%) below last year’s levels.
Estimated imports of Russian gas into Europe in December grew m/m by 1.26 bcm to 12.42 bcm, and remained higher y/y by 3.57 bcm (40%), with a sharp y/y ramp up in flows to Germany, Slovakia, and Romania. Similar to the past few months, European utilities are taking advantage of lower oil-indexed prices for Russian gas.
Ukraine took 2.25 bcm out of storage in December, compared to a draw of 2.54 bcm in December 2014, and its storage levels are still 2.5 bcm (22%) higher y/y. Reverse flows from Slovakia, via the Budince interconnector, also fell again y/y by 62% (0.56 bcm).
As of the beginning of 2016, Ukraine stopped buying Russian gas. This means that over Q2 16 – Q3 16, Ukraine will need to rely more on reverse flows from Slovakia for storage injections. While December was warmer than normal, short-term forecasts point to a cold second half of January across the region.
Austrian virtual trading point (AVTP) prices largely retained their premium to the northern hubs, with the call for reverse flows to Ukraine improving over the month. As more Russian, Norwegian, and LNG supplied volumes should be available in the northern gas markets than the south, and the level of reverse flow to Ukraine staying strong, this premium is unlikely to drop much and could potentially widen if the weather sees a sustained cold spell.