EU Natural Gas (TTF)

September 3, 2020

The Research Team reviews the EU Natural Gas (TTF) market

 

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3 September 2020

  • Pipeline flows remain weak with the Russian segment still well below -20% YoY. This week, NW Europe has also exhibited a substantial decline due to the slowdown of Norwegian imports. LNG inflow is also signalling a significant drop if compared vs. the previous week (below -10%). This further tightens the overall spot supply, which is currently 11% below relative to its long-term mean (see chart). The storage capacity is levelling off at around 91%. It is unlikely this figure will increase significantly over the next few weeks.
  • While low pressure areas will try pushing from the Atlantic into Europe, their trajectory will be further north. This forecast is associated with some uncertainty regarding the exact location of the low pressure systems, which in turn will generate a high volatility on the wind output and hence on the indirect gas demand. Temperatures will slightly increase into week 37, however the associated positive anomalies will be small. The fossil fuel profile over continental Europe continues to favour gas over coal (if compared against 2019), which provides a good ground for a stable gas demand beyond the short-term time frame (i.e. day +10 and beyond).
  • While the supply trend (see the “thought of the week”) has provided the ground for the current rally, the recovery of the macro economic environment has also helped. The Business Expectation Index rebounded strongly from May onward, although it is now showing a clear slowdown (but not yet a contraction). A similar development has been observed in other macro indicators, such as the continental PMI. The autumn season (and more specifically, Q4) will be a crucial phase to verify how robust the recovery will be.

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