2 July 2020
- The spot supply continues to be largely affected by the substantial slowdown of LNG imports, which has led to an unprecedented free fall in LNG send-out (week 27 is another 10% down relative to week 26). Pipeline gas has partially rebalanced the loss in LNG, with an uptick from the Russian side (while NW Europe has declined on a weekly basis). The result is, once again, a further drop in the storage surplus relative to 2019. Week 27 should end up with a positive margin of +5/6% (after being as high as +12% at the end of May). Should the current trend continue, the surplus could be virtually absorbed at some point between the end of July and first half of August.
- The short-term demand will remain subdued thanks to unusually strong winds and temperatures below their norm. However, high pressure conditions are set to amplify once again during week 28, leading to an increase in surface temperatures and a reduction in renewables output. This trend is conducive to a demand improvement heading towards mid-month. Meanwhile, the overall power demand performance over western Europe continues to improve, providing ground for a short-term positive outlook (see also the macro section).
- The macroeconomic picture is currently looking promising for Europe. We had already anticipated a swift recovery of some indicators into June. The PMI is now back to where it was before the outbreak of the pandemic. France is exhibiting a higher value than three months ago, while Germany is slightly below. The Business Expectation Index for some of the relevant segments has made the largest jump on record, with all sectors indicating a prompt pick-up in production. We have strong evidence that July will be the peak month (i.e. outperforming June) in production before a (brief?) slowdown during August.