Gas storage withdrawal season begins in Europe

LONDON (ICIS)–Natural gas storage withdrawal season has begun in Europe, despite stocks remaining below last year’s levels.

Net withdrawals took place for the first time on 28 October, according to data collated by ICIS, two days earlier than withdrawals began last year.

Europe had around 75 billion cubic metres (bcm) of gas in store as withdrawals began, almost 2bcm lower than on the same date last year.

LNG stocks are higher than on the same date last year, but only by around 300 million cubic metres (mcm). Countries with LNG terminals, including the Netherlands, Britain and Belgium, have been increasingly using this as a source of flexibility this year.

ICIS shipping platform LNG Edge shows four laden vessels heading for Britain in the coming week, as well as 11 to France and two apiece to the Netherlands and Belgium. This will replenish some of the LNG stocks.

Household demand increased significantly over the weekend, meaning that LNG send-out alone cannot cover demand. In the Netherlands, demand from households and small businesses rose to an average rate of 109mcm/day in the past two days, from 56mcm/day in the last working week.

Day-ahead and front-month contracts have been trading close together at key hubs in the last two sessions, so shippers appear to be acting more on physical demand signals than financial incentive.

Once November begins, there looks to be even less financial incentive to withdraw, with November ’18 currently trading well below December ’18 and Q1 ’19 at many hubs. On Monday, ICIS assessed the TTF November ’18 contract €0.60/MWh below December ’18.

However, day-ahead prices may rise as the new month begins.