7 August 2019
- Gas volumes from Russia picked up once again after the maintenance work, sending our E/NW spread at higher levels. This is also the result of tight conditions over NW Europe. Total supply (pipeline & LNG) has moved back to above-average levels, although the margin (relative to the long-term mean) remains small. LNG volumes for the next two weeks are expected to stay at current levels, perhaps slightly higher (i.e. towards 12/13 TWh/week). Re-stocking rates have significantly curbed during the past 2/3 weeks. With more than two months left before the de-stocking season commences, there is only a 10-12% spare capacity.
- Demand will struggle to improve during the next 5 to 10 days. Temperatures are expected to drop over most of central and northern Europe as the jet-stream tends to move over the region. This will also increase the wind output across central and northern Europe (including the UK). The climate spread is predicted to further drop. When fossil fuels will be utilized to produce power, the priority will be given to natural gas.
- The short-term macroeconomic environment remains weak. The PMI has recorded new record lows, with Germany exhibiting the largest drop. The Industrial production also trended downward. The M-on-M figure was as negative as that recorded in November 2018. However, our BE index provides some evidence for a potential recovery starting as early as August. The EI index remains stable and close to neutral values, suggesting demand will not recover in the short-term (i.e. next two weeks).