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Gas and power market analysis - BP · Carbon prices fall following recent highs EUA carbon futures...
Transcript of Gas and power market analysis - BP · Carbon prices fall following recent highs EUA carbon futures...
Gas and power market analysis
October 2019
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Gas prices increasing but remain low
Global gas benchmarks European gas benchmarks
PEG = French gas
PSV = Italian gas
PVB = Spanish gas
NBP = British gas
TTF = Dutch gas Source: NYMEX, ICE, Heren, S&P Global Platts ®
Futures as of 04/10/19
• A mild winter and strong supply saw NBP, TTF and JKM all fall by over 60% from Sep-18 to Jul-19. • Prices have increased from Jul-19 lows and have been volatile following news of potential European
supply reductions.
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€/MWh
PEG PSV PVB NBP TTF
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European coal switching Oil parity
HH JKM
NBP TTF
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European gas supply – Groningen & OPAL
Source: NAM, OPAL Gastransport GmbH & Co. KG
Groningen gas production
…
OPAL flows to the Czech Republic
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Groningen Production
Rolling 12 Month Production
Proposed Cut
• Groningen – Gas extraction will stop mid 2022 from the Groningen gas field, following ongoing earthquakes
in the area, rather than the previously expected date of 2030, according to a Dutch government
announcement during Sep-19.
• OPAL – On 14-Sep-19, the ECJ overruled an EU decision allowing Gazprom to ship more gas via the OPAL
pipeline. This lead to a 40% flow rate decrease since 14-Sep-19, or about 400Gwh.
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European pipeline imports falling
Europe pipeline imports
AlgeriaNorway
RussiaTotal
Source: Official TSO Statistics
Pipeline flows into Europe have fallen with pipeline maintenance, high storage inventories and strong LNG supply.• Algerian imports fell from over 100 mcm/d in Jan-19 to 40 mcm/d, where they have remained steady. • Russian and Norwegian imports have fallen, resulting in a significant total European pipeline imports reduction in
3Q19.
Total flows are from Russia, Norway, Algeria & Libya; Russia flows are to Central Europe only
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mcm/d
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European gas inventories have built significantly above historic average levels
N.B. data from GIE does not incorporate all storage facilities in each country, but rather can be used as a proxy for total storage
Source: Gas Infrastructure Europe
European GIE storage
• A mild winter reduced the need for storage withdrawals, compared to 2018 where extreme weather caused storage levels to fall to their lowest in recent years.
• European gas inventories were on average 22 bcm higher year-on-year across 3Q19 with injections supported by strong LNG imports and pipeline supply in Europe.
• Consequently, storage levels are close to capacity.
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bcm
11-15 Range 2016 2017 2018 2019
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Germany France
Netherlands Spain
Italy UK
N.B. data from GIE does not incorporate all storage facilities in each country, but rather can be used as a proxy for total storage
Source: Gas Infrastructure Europe
Strong European Storage injectionsGermany, France and Spain have sustained high inventories whilst Italy, UK and the Netherlands tracked close to average levels.
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LNG send-outs remain strong
N.B. data does not incorporate all regasification facilities in Europe, but rather can be used as a proxy for LNG send-outs
Monthly European LNG send-outs
Source: Official TSO Statistics
• During 2019 European send-outs have more than doubled year-on-year, as strong global LNG supply and slower LNG demand growth in Asia resulted in a wave of LNG cargoes heading into Europe.
• After reaching a record ~340 mcm/d in April 2019, send-outs have retracted although still remain historically high.
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mcm/d
UK France Italy Spain Netherlands Belgium Lithuania Poland Portugal
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Global LNG supply and demand
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MT/month
Asia Europe Rest of World
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MT/month
Middle East Asia Australia Atlantic Rest of World
Global LNG Demand Global LNG Production
• Asian LNG demand has grown 6% year on year, compared to a 16% growth in year on year Global LNG Production. • This growth rate discrepancy helps explain why more LNG cargoes are heading to Europe, increasing European
supply.
9Source: BP AnalysisYear-on-year analysis used data from Sep-17 to Aug-18.
European heatwave in June followed a mild winter
Europe Cumulative HDDs
Source: BP Analysis
Europe Cumulative CDDs
• A mild winter across Europe resulted in below average HDDs contributing to a reduced need for storage withdrawals.
• In late June 2019 much of Europe experienced a heatwave during which France hit a record temperature of 45.9˚C, resulting in a spike in CDDs across many European countries.
Gas Years
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'04 - '14 2015 2016 2017 2018 Average '04 - '17
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European LNG reloads JKM-TTF spread
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$/MMBtu
JKM-TTF TTF JKM
Source: BP Analysis, Heren, S&P Global Platts ®
JKM-TTF spread widened slightly in 3Q19 but remains historically narrowThe spread has widened in 3Q19, creating some arbitrage opportunities, albeit demand in Asia remained lacklustre hence subduing reloads.
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Carbon prices fall following recent highs
EUA carbon futures
Source: ICE
Volatility in EUAs continues, with prices rising over 15% from Jan-19 to Aug-19, but since decreasing, with Oct-19 prices lower year-on-year. Despite this prices remain high, giving support to European gas prices.
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€/MT
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