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Northwest Europe to rely on German storage

22 Feb 2018 17:46 GMT
Northwest Europe to rely on German storage

London, 22 February (Argus) — Dutch and French storage facilities could empty before the end of the winter if withdrawals are brisk during the upcoming cold spell, but Germany still has ample stocks.

Northern French stocks of just 10.2TWh on 21 February were over 9.5TWh below the three-year average for the date.

Overnight lows in Paris were forecast to average just -2.2°C on 23 February-8 March, over 4°C below the seasonal norm. And longer-term forecasts suggested colder-than-average weather into mid-March.

Based on the correlation between stock movements and temperatures since 1 October and assuming temperatures in line with recent forecasts, Peg Nord withdrawals could be 500 GWh/d on 21 February-14 March. This would be enough to completely empty sites by 15 March.

In contrast, southern France still held more than in some recent years and sites will not empty by the start of the summer unless withdrawals accelerate considerably from recent weeks. But Peg Nord facilities coming close to emptying may require a quicker weather-adjusted draw on TRS stocks compared with earlier in the winter, to allow for some deliveries into northern France.

And Dutch facilities — excluding Norg, which is used to shape Groningen production — could also be empty by 1 April, although they may not be depleted as quickly as in France.

Sites held just 23TWh yesterday morning, compared with the two-year average of 37.5TWh. Bergermeer only became fully operational in April 2015, complicating comparisons further back.

Weaker Groningen production for sale, including Norg withdrawals, so far this winter has increased Dutch high-calorie demand for conversion to low-calorie supply and driven stronger withdrawals than in previous years.

Average overnight temperatures in Amsterdam were projected at -4°C on 23 February-8 March, around 5°C below the seasonal norm. And longer-term outlooks suggest the cold snap could persist into mid-March.

Using the correlation between withdrawals and temperatures since 1 October and the most recent forecasts, the stockdraw could climb to 641 GWh/d on 21 February-22 March. This would leave just 4.4TWh on 23 March.

Germany still has ample supply

In contrast to some parts of northwest Europe, there is still plenty left in German storage for rapid withdrawals to help France, the Netherlands and the UK meet strong demand in the coming weeks.

German inventories stood at 86.8TWh yesterday morning, 7.8TWh below the three-year average for the date. But stocks were still at a 15.1TWh surplus to a year earlier.

The stockdraw could be 1.68 TWh/d on 21 February-22 March, based on the correlation between temperatures and stock movements since the start of the winter and forecast temperatures. This would leave 38TWh on 23 March.

But strong import demand from the UK, France and the Netherlands could increase the weather-adjusted stockdraw in the coming weeks.

Withdrawals would have to jump to 2.23 TWh/d over the remainder of the winter to empty sites by 1 April. The daily stockdraw has topped 2.23 TWh/d on just six days since the start of this heating season. And withdrawals over any full month in recent years were highest at 2.1 TWh/d in January 2017. Demand had been particularly strong because of a combination of cold weather and high power sector gas burn, which was buoyed by French nuclear outages and low renewable generation.

TTF prompt and near-curve prices have opened up a significant premium to the German hubs to encourage imports from Germany and quicker deliveries from Norway and Russia. The wide TTF premium to the NCG and Gaspool could also encourage capacity holders at facilities located in Germany but with access to the Dutch grid to deliver into the TTF only.

And Peg Nord day-ahead prices remaining at a wide premium to the NCG may provide an incentive for further brisk deliveries into France at Obergailbach. Obergailbach flows already rose to 463 GWh/d on 1-20 February from the three-year February average of 263 GWh/d, but there was room for flows to step even higher.

And the UK may increase its deliveries along the Interconnector and BBL with strong heating demand expected in the region as well. Firm booked capacity on the BBL is 371.7 GWh/d for March. And the NBP-TTF March basis market of +4.12p/th at yesterday's close was already wide enough to cover the cost of short-term capacity bookings on the route.

Central and eastern European stocks add supply

Aggregate central and eastern European storage facilities have remained full in comparison with sites further west.

Combined Austrian, Czech, Slovak, Hungarian and Polish inventories stood at 96.8TWh yesterday morning, 10.1TWh above the three-year 21 February average and at a 24.5TWh surplus to a year earlier.

Withdrawals would have to jump to 2.48 TWh/d over the remainder of the winter to empty sites by 1 April, compared with the three-year 22 February-1 April average of 912 GWh/d.

A delayed switch to injections and a slow start to withdrawals allowed stocks across the region to rise well above average late last year. Mild weather and weak Ukrainian import demand weighed on prices for delivery in the fourth quarter 2017, curbing withdrawals.

But the stockdraw has accelerated this month, as temperatures fell closer to seasonal norms and prompt and near-curve prices opened up a discount to the NCG, encouraging quick deliveries to Germany at Oberkappel and Waidhaus.

Deliveries from central Europe could help offset the call on German storage to meet demand from countries where sites were at risk of emptying.

But higher stocks in eastern Europe may be partly held by Gazprom, which uses its storage to make long-term contract deliveries rather than trade hub spreads. The firm entered the winter with 8.79bn m³ held in its own and leased European storage, up from 4.7bn m³ a year earlier. Gazprom had booked 1.8bn m³ of extra storage capacity for the 2017-18 storage year in early August.

And stocks in some countries may have been boosted further by higher supply security requirements and new storage obligations that may be difficult to release for commercial use.


Central European markets-NCG day-ahead basis €/MWh

Oberkappel flows GWh/d

German stocks only slightly below average TWh

Austrian, Czech, Slovak, Hungarian, Polish stocks TWh

TTF, Peg Nord March markets at premium to NCG €/MWh