8 November 2019
- The LNG imports have substantially increased over the past two weeks, back to the high levels recorded in Q1. Our forecast suggests they should flatten out (or even slightly decrease). On the other hand, pipeline flows are converging towards a regime that typically leads to a positive price development, with the Russian flows on a raise and NW Europe getting tighter. The re-stocking cycle has officially ended. The rate of de-stocking should commence at a relatively high pace, provided LNG volumes do not further increase in the meantime.
- There is a strong consensus in the weather forecast for high pressure conditions to develop over northern Europe. The above scenario will keep western Europe below-average, from a temperature standpoint, supporting good gas demand. Winds will also be significantly below average over central and northern Europe, also contributing to the increase in demand. The climate spread (based on German contracts) sits comfortably in negative territory (i.e. gas remains more profitable to burn than coal).
- While macroeconomic conditions are still relatively weak, there are multiple signs of recovery. The BE index that we calculate has been signalling one of the highest value since we started recording it (in fact, the second highest after Jan 2019). Likewise, the PMI has been trending positive into October, although the difference is rather small and will have to be supported by future readings. The Energy Intensity Index (unit of demand per GDP) is also climbing – week 46 is set to record the highest value since the beginning of the year.