In July and August, total gas demand was down 1.5 bcm (-15%) y/y on hotter than normal temperatures. Total demand across the first eight months of 2013 remains up 1.35 bcm (2.4%) y/y, due to the strong demand seen in March and April.
UK indigenous production continues its decline with DECC data for January to June reporting that the UKCS production was down by almost 1.8 bcm (-8%) y/y. The y/y reductions have been seen in every month apart from May and this just points to the continued reductions of the core producing fields that are well into maturity.
Imports from Norway over the first six months of the year are up; DECC data indicate gains of some 1.8 bcm (13%) y/y. For July and August, Grid data indicate that while imports via Langeled were down some 736 mcm (-28%) y/y on infrastructure problems, imports through St. Fergus (Shell and Total) were up some 477 mcm (21%) y/y – leaving total Norwegian supplies over these two months down some 260 mcm.
Imports from the Netherlands are exhibiting considerable seasonal swing, with DECC data pointing to H1 13 flows being up 383 mcm (9%) y/y, although flows over July and August are basically flat y/y.
The Belgian import / export balance has responded to UK demands this year, with the first six months showing that UK imports were up 2.7 bcm and UK exports to Belgium fell 0.99 bcm (43%) y/y – leaving the net export position down by some 3.7 bcm (-60%). Grid data for the summer months point to UK net exports being down another 1.1 bcm - with most of that being a reduction in exports to the continent.
By the end of August the levels of gas in storage, that have been down y/y due to the March cold spell, managed to recover to just 420mcm below the 1 Oct 2012 level. With September turning cold early, injection rates have slowed and by the 15 September, the UK was still 393 mcm short of those levels.
In terms of the outlook, the UK gas market is likely to see some y/y demand reductions in the coming winter season, with reductions in residential demand likely to overshadow increases in gas used by the power sector. As LNG is likely to remain scarce, Norwegian production will probably still struggle on outages, and gas in storage is likely to be lower, the UK will have to continue to source gas from the Continent to meet its winter demand. Overall, that should be supportive of price levels.