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Gas demand in western europe curbed as mild temperatures set in

Gas-300x203Western Europe can expect reduced demand for gas-fired heating in the near term with forecasts indicating above normal temperatures

In the UK, Belgium, France, Germany and the Netherlands temperatures pushed above five-year averages on Tuesday, which comes in contrast to mid-October when the five countries were all below norms — by as much as 8 degrees Celsius in some, Eclipse Energy, an analytics unit of Platts, said.

France saw the highest breach of norms by 3.8 C.

In the UK, local distribution zone demand for gas, which is largely driven by heating use, fell to 126 million cu m/day Tuesday, down from 139 million cu m/d Monday, and 12% lower than Sunday’s 143 million cu m, Eclipse data showed.

It is forecast to fall further, to as low as 113 million cu m/d at the end of the month, as the UK’s temperature is expected to climb 4.3 C above norms.

LDZ demand combined amongst the countries was 500 million cu m on Monday, and is forecast to drop by about 16%, shedding almost 80 million cu m, to 421 million cu m by the end of the month, Eclipse said.

With almost no exceptions, the above average temperatures in the five countries are forecast to remain above averages as far as Eclipse’s forecasts stretch — to November 6.

They are expected to exceed norms by the largest amount at the end of October and then drift closer to norms throughout the first week of October.

Last week, the chief meteorologist at forecast agency WSI, Todd Crawford, said most of Europe is set for a warm winter.

“The signals that I can see from El Nino [point to] another warm winter like the past two, especially across central and eastern Europe,” Crawford said.

Mild temperatures add yet more bearish weight to the gas market which has seen a steady decline in prices on the back of strong supply and weak oil prices.

The UK winter contract’s expiry this year of 42.15 pence/therm was the lowest since 2009 which settled at 34.95 p/th.

Prices have fallen further since then. The UK NBP contract for Q1 2016 ended last month at 42.85 p/th, and has fallen 5% since then to close Tuesday’s trade at 40.55 p/th.

Eclipse’s short-term demand model is calculated from demand, temperature and wind speed outturns in addition to deviations between weather forecasts and these last outturns.