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The Southern European gas markets of Spain and Italy went through September and Q3 13 shedding gas demand, with the reductions following the trend set in previous months. For Spain, this mostly meant seeing gas-fired power generation struggle to get running hours against falling end user demand, very good hydro generation levels, and cheap coal. For Italy, all of the solar generation that was built in the last two years (13 GW) is starting to take its toll on gas plant that previously thrived on meeting summer peaks.
Supply patterns also followed recent trends. For Spain, this meant it continued to lose LNG over the summer and mostly made up for it by taking more Algerian gas. With Algeria not having any new gas production come on-line, Italy lost considerable volumes from the south as a result and instead turned east to Russian gas to achieve market balance. After a few months of Italy posting modest y/y gains in LNG takes, September reversed that, and the country joined most of the rest of Europe in seeing LNG cargoes sail away.
Looking forward, the overarching difficult macroeconomic outlook means there is not that much fundamental change and we expect both countries to continue to have low gas demand over the winter. Spanish gas demand will be hindered by high expected hydro generation while Italian gas demand will be kept modest by a winter we are assuming will be milder than the last.
