Fundamentals: Ukrainian withdrawals muted as natural gas exports from EU rise

Source: Heren


EU exports of natural gas to Ukraine have moved higher since the start of November, limiting the need for shippers in Ukraine to withdraw volumes from storage.

The rise in eastbound flows will likely support balance-of-month wholesale prices at central European hubs over the remainder of November.

But although exports from Slovakia and Hungary have risen in recent days, flows remain below technical capacity, suggesting that buyers in Ukraine are not overly short of gas currently, and nor do they expect to be in any serious deficit through the high-demand first quarter.

If there was any perceived shortness in Ukraine supply-demand fundamentals into the first quarter of 2018, throughput at the Slovak Budince point in particular would be higher, as this would limit further the need to utilise gas in store presently. That gas could then be held in reserve until the high consumption months of January and February.

So while EU exports are up and could support prompt prices, as they have not risen hugely it is likely to be a bearish signal for monthly gas products through to April in markets such as Slovakia, Hungary, Poland, as well as Austria and the Czech Republic.


As it is, storage stocks in Ukraine remain well up year on year, even though net withdraws have been ongoing for around two weeks.

Data from Ukrainian grid operator Ukrtransgaz – released with a lag of a few days – shows that tanks on 2 November housed 16.8 billion cubic metres (bcm) of gas, up 17% on the same day in 2016.

Withdrawals in the opening four days of November have averaged 13 million cubic meters (mcm)/day, down from 20mcm/day in the same period in 2016. What is more, only 155mcm has so far been pulled from stocks since net injections ended on 25 October. Last year, net injections ended on 15 October, and by 4 November some 341mcm had been withdrawn.

Forecasts from WSI show that at least for the coming five days, temperatures in Ukraine are up to 4°C above seasonal norms, which will temper household consumption and limit any rise in withdrawals.

During October, flows from Slovakia and Hungary to Ukraine dropped, as did injections into Ukrainian storage. This indicated Ukrainian storage capacity holders were nearing their desired fullness for the season.

Data from Slovak grid operator Eustream shows that Budince throughput averaged almost 26mcm/day through September, but this fell to around 18mcm/day in October. Since the start of November the flow has averaged 24mcm/day. Technical capacity at the point is around 42mcm/day.

Hungarian exports to Ukraine at the Beregdaroc point, while lower, follow a similar profile to those at Budince, data from Hungarian operator FGSZ shows.

Ukrainian incumbent Naftogaz imports a large proportion of the gas from the EU. Under a loan from the European Bank for Reconstruction and Development it can purchase gas from around ten major European counterparties, including Shell, ENGIE, RWE and EDF.

Increasingly, Ukrainian independents are also importing gas from the EU, as are major European participants which now have direct grid and storage access rights.