Analysis from UBS indicates a decrease in the risk premium for European gas, as stable Russian supply has led to a drop in TTF futures below €45/MWh, down from earlier winter highs of €49/MWh.
Despite ongoing uncertainties around Russian piped gas exports to Europe, the market has shown resilience with prices expected to fluctuate in the low to mid-€40 range for the remainder of the winter season.
European gas storage levels have aligned with the five-year average, standing at 81% or 84 billion cubic meters (bcm) as of December 10, although this is 10% lower than the same period in 2023.
The rate of net withdrawals has increased, surpassing both last year’s and the five-year average figures, attributed to colder temperatures and a slowdown in LNG imports. Projections suggest that storage 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, the demand for gas in Europe saw a year-over-year increase of 3% to 35bcm, largely due to colder weather, yet it remained 16% below the average for the years 2017-2021. The power sector experienced a rise in gas usage as a result of lower wind generation and reduced temperatures.
Furthermore, industrial demand in the EU’s top five consuming countries went up by 15% month-over-month, though it was still lower compared to the previous year and the three-year average.
Piped gas imports into Europe remained relatively unchanged month-over-month and year-over-year in November, with UBS Evidence Lab data showing a total of 16.3bcm. Norwegian supplies stayed level from the previous month but saw a year-over-year decrease due to unplanned outages.
Russian gas imports experienced a slight decline of 5% month-over-month, equating to 0.1bcm, amidst a contractual dispute between OMV and Gazprom (MCX:). However, imports through other routes were stable, with only a 1% month-over-month reduction at 3.9bcm.
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