Central Europe experienced a colder month in January compared to the previous year. As such, gas demand in the region was up y/y by 0.71 bcm (5%) to 5.45 bcm. All countries, except for Slovakia, saw stronger demand. Storage withdrawals in the Baumgarten zone were around 3.18 bcm in January, some 1.66 bcm higher than last January. As of 1 February, inventory levels at all the central European hubs remain considerably lower than last year, now 2.4 bcm (-23%) below last year’s levels.
Estimated imports of Russian gas into the EU in January fell m/m by 0.7 bcm to 11.8 bcm, but remained higher y/y by 3.57 bcm (40%), with a sharp y/y ramp up in flows to Germany, Slovakia, and Romania.
Ukraine took 2.9 bcm out of storage, compared to a draw of 2.15 bcm in January 2015, and its storage levels are still 1.8 bcm (19%) higher y/y. Reverse flows from Slovakia, via the Budince interconnector, also fell again y/y by 0.17 bcm (-17%). However, since mid-January, reverse flows have ramped up to around 35 mcm/d, compared to only 11 mcm/d over the first half of January. We had anticipated an upsurge in reverse flows in our previous data review, as Ukraine replaces gas directly purchased from Russia.
While January was colder than normal, short-term forecasts point to a warm second half of February 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 rising over the month. The premium of D+1 AVTP prices to the TTF was at 0.98 €/MWh over January—only slightly narrower than last year’s 1.02 €/MWh. A number of factors should help keep the AVTP at a healthy premium to the TTF: Russia preferring the export route through Nordstream; greater availability of LNG, which will be more focused on Northwest European markets; and Ukraine relying more on reverse flow gas. If regional demand remains strong (i.e. central Europe is colder than Western Europe) and reverse flows stay at current high levels, that premium should see pressure to widen.
In December, Poland received a commissioning cargo of Qatari gas into its 5 bcm/y Swinojscie terminal. PGNiG has a 20-year supply deal with Qatargas for the supply of 1.2 bcm/y. Commercial operation of the plant is expected in Q2 16 with the ability to use the full capacity expected in 2018.