Analysis of European Gas Supply

Analysis from UBS indicates a decrease in the risk premium for European gas, attributed to stable Russian supply, resulting in TTF futures dropping below €45/MWh, down from previous winter highs of €49/MWh.

Despite ongoing uncertainties regarding Russian piped gas exports to Europe, the market has demonstrated resilience, with prices expected to fluctuate between the low and mid-€40 range for the remainder of the winter season.

European gas storage levels have aligned evenly with the five-year average, currently at 81%, or 84 billion cubic meters (bcm), as of December 10, although this marks a 10% decrease compared to the same period in 2023.

The rate of net withdrawals has increased, surpassing both last year's and the five-year average figures due to colder temperatures and a slowdown in LNG imports. Projections indicate that storage levels could end this winter in the low-40% range, which is 15% below this year’s levels but 8% above the five-year average.

In November, European gas demand saw a year-over-year increase of 3% to 35 bcm, largely due to cooler weather conditions, though it remained 16% below the average demand for the years 2017-2021. The power sector experienced increased gas consumption due to reduced wind generation and falling temperatures.

Moreover, industrial gas demand in the EU’s top five consuming countries rose by 15% month-over-month, although it was still lower compared to the previous year and the three-year average.

Piped gas imports into Europe remained relatively unchanged both month-over-month and year-over-year in November, with UBS Evidence Lab data indicating a total of 16.3 bcm. Norwegian supplies were stable compared to the previous month but displayed a year-over-year decrease due to unplanned outages.

Russian gas imports saw a slight decline of 5% month-over-month, translating to 0.1 bcm, due to a contractual dispute between OMV and Gazprom (MCX:GAZP). Nonetheless, imports through other routes remained stable, with only a 1% month-over-month reduction at 3.9 bcm.

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