Data for the German gas market indicates that over the summer months:
German consumption was down in July, as were all months this year y/y except for March which was very cold. Over the first seven months, implied German demand appears to be down 1.1 bcm (-2%) – driven in part by some of the 4 GW of new coal plant that is expected on the system this year starting to come on-line.
German domestic production was down 59 mcm (-8%) y/y in July, continuing a trend that has seen production fall consistently across the year.
German flows have been volatile with a general pattern of winter months showing an increasing east to west movement of gas through the country – with Russian imports up as were exports to France and Belgium, whilst net imports from the Netherlands were down. The summer months have been more about filling storage, which has seen an increase in net imports from the Netherlands and Norway in July and August.
The call on storage in the winter was significant (some 12 bcm over the first four months of the year) and the market has worked hard to refill that, increasing storage injections y/y by around 2.3 bcm over just the July and August period. At the end of August, German storage numbers were still around 2 bcm lower than last year. Headway has been made in filling that storage and by the middle of September inventory levels were only 1.6 bcm lower y/y.
The outlook for gas demand in Germany continues to look weak given the large amount of new coal plant that is currently coming online. While closures of some older plant might help provide added running hours over the winter, the current price relativities suggest a continuing squeeze on gas-fired plant operating hours. Give expectations of a milder winter in Northern Europe compared to last year, we anticipate that demand across the coming winter will be lower by 2.5 bcm y/y, and will continue to be low over 2014, dropping 4 bcm (-5%) y/y.