Easing gas demand fundamentals in France could pressure contracts at the PEG Nord gas hub next week, bringing prices back in line with the Belgian ZTP hub. This should rebalance Belgian exports in favour of Britain.
High demand in France had driven the PEG Nord hub far above the Belgian ZTP for much of January, creating a price gradient for bumper Belgium-France exports and stifling Belgian flows to Britain.
The PEG Nord-ZTP Day-ahead spread has regularly closed around €1.00/MWh since 5 January, peaking at €3.075/MWh on 17 January.
Only once since the ZTP hub began operations in 2012 has the spread been wider. During the 2015 gas winter, the spread averaged just €0.247/MWh, trading within a range of -€0.212 and 0.875/MWh.
This wide spread provided a price incentive for shippers to send more gas from Belgium to France. Belgium exported an average of 50 million cubic metres (mcm)/day to France between 16-20 January, 11mcm/day higher than between 1-15 January.
The high demand was caused by a cold snap which saw mercury in France and Belgium plunge to 8°C below average last week, with consumption on Wednesday hitting a four-year high across France and the Benelux region.
The situation was particularly acute in France, where gas demand from the power sector has exploded due to a raft of nuclear outages.
Forecasters are now predicting warmer weather across northwest mainland Europe next week, which should curb domestic demand and pressure the PEG Nord-ZTP spread.
French grid operator GRTgaz has forecast consumption at 252mcm/day at the start of next week, around 20mcm/day lower than the end of week 3.
On Friday afternoon, GRTgaz issued an amber alert for the PEG Nord zone for 21 January, warning of a system bottleneck in the northern zone due to oversupply.
The operator has ordered shippers to reduce supply to the PEG Nord zone via the Norwegian, Belgian H-gas and German pipeline entry points. Imports via all points had been running at multi-year highs, as shippers increased imports to cope with the soaring consumption levels.
The arrival of the first commercial cargo - the 210,000cbm Murwab - at northern France’s Dunkirk LNG terminal on 22 January will provide greater supply to the region. The terminal is able to send gas directly to both the French and Belgian networks.
With the demand scenario on the continent set to ease, Belgian exports could rebalance in favour of Britain rather than France. In recent weeks, France and Britain have been competing for Belgian gas, with Belgian exports to France and Britain inversely correlated (see graph).
British demand should remain high next week due to fresh outages at the Rough storage site and sluggish LNG send-out. The Zeebrugge WDNW basis closed below the Day-ahead on Thursday, an indication that Belgium-Britain flow should pick up.
In contrast, the PEG Nord-ZTP February spread closed at €0.337/MWh on Thursday, an indication the spread could narrow and we could see reduced Belgium-France flows by next month.
Cold, nuclear risk
Any downward revision in the temperature forecast or update to France’s nuclear availability schedule are the main factors that could change this scenario and maintain the PEG Nord-ZTP spread looking forwards, according to a trader at a French utility on Friday.
Gas burn for power hit fresh highs in October, November and December and has shown no sign of letting up so far in January.
“A fall of 1°C drives a rise in electricity consumption equivalent to the production of more than two nuclear reactors,” according to the French energy ministry. email@example.com