Central Europe experienced a colder than normal month in October. Gas demand in the region was up y/y by 0.5 bcm (14%) to 4.03 bcm. Poland, Hungary, and the Czech Republic burned 0.76 bcm more gas together y/y, while only the more southern markets of Austria and Slovakia consumed 0.26 bcm less gas compared to October last year.
Storage injections in the Baumgarten zone were around 0.39 bcm in October, 75 mcm lower than last October. All markets saw a net injection into storage except for the Czech Republic, which took 0.16 bcm out of storage. As of 1 November, inventory levels at all the central European hubs, except for Poland, are still considerably lower than last year, now 2.9 bcm (-17%) below last year’s levels. In Poland, storage levels are up by 13% y/y.
Estimated imports of Russian gas into the EU in October increased m/m by 1.12 bcm, and by a massive 3.97 bcm (39%) y/y, with a sharp ramp up in flows to Poland and Romania. Similar to the past few months, European utilities are taking advantage of lower oil-indexed prices for Russian gas. The resumption of Russian exports to Ukraine has also meant Ukraine managed to inject 1.34 bcm of gas into storage over the month of October, and its storage levels are now almost 1 bcm (6%) higher y/y. Reverse flows from Slovakia, via Budince interconnector, also fell sharply by more than 50% (0.41 bcm).
Over the coming winter, the region should see more comfortable supplies, with Russian gas flows to Ukraine now keeping the region well supplied and minimising winter supply shortage risks. While Russia and Ukraine still need to reach a Q1 16 supply agreement, Russian contract gas is at reasonably low price levels. Strong Ukrainian injections into storage over October mean that even its supply position has become more comfortable for the start of winter.
While October was colder than normal, short-term forecasts point to a warm first half to November across the region. However, we still expect this winter to be just moderately colder y/y, with IRI forecasts suggesting it could be around normal or warmer than normal in most of the region’s countries.
Austrian virtual trading point (AVTP) prices are likely to lose some of their premium to the other hubs, as the call for reverse flows to Ukraine has fallen to nearly half of peak August rates. As more Russian, Norwegian and LNG supplied volumes should be available in the northern gas markets than the south, this premium is unlikely to drop too far.