7 February 2020
- The supply balance in Europe has slightly shifted over the last 10 days or so. LNG imports have flattened out (with a slight decrease in week 6), and NW Europe experienced some mild tightness. The small deficit has been balanced by increasing Russian volumes, which saw their y-on-y figure move from -35/38% to -26%. As a result, storage destocking rates have been weakening and the total supply is still comfortably above the long-term mean.
- The weaker than average destocking rates are also due to a very poor demand, with HDDs predicted to stay well below the average of the period (up to -4ºC). Renewables contribute in deteriorating the demand for gas, with our gas/wind spread index predicted to tumble once again to -60% (week 7). The climate spread continues to drop, increasing the margins for gas-produced power (at the expense of thermal coal).
- On the macroeconomic side, the short-term demand looks equally bad. Our energy intensity index is set to dive below -2, the lowest value in the past 12 months. The low frequency signal is more supportive of a positive price development, with a strong m-on-m increase in the business expectation index and an increasing PMI