Gas and power market analysis - February 2020 - BP
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Gas and power market analysis February 2020
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2Historically low mid-winter gas prices
• NBP, TTF and JKM have fallen by between 10-20% since Oct-19 and are currently at their lowest winter levels
since 2005.
• The drop in prices comes against a backdrop of strong gas supplies into Europe, record high European storage
levels, growing LNG supply, lacklustre LNG demand growth in Asia and a new pipeline gas transit deal between
Russia and Ukraine.
Global gas benchmarks European gas benchmarks
$/mmbtu €/MWh
40
14
12
10 30
8
6
20
4
2
0
2015 2017 2019 2021 2023 2025 10
2015 2016 2017 2018 2019 2020
European coal switching Oil parity PEG PSV PVB NBP TTF
HH JKM
PEG = French gas
NBP TTF PSV = Italian gas
PVB = Spanish gas
NBP = British gas
Futures as of 09/01/2020 TTF = Dutch gas Source: NYMEX, ICE, Heren, S&P Global Platts ® 3European pipeline imports recover following summer
maintenance
• Pipeline flows into Europe increased during 4Q19 following higher imports from Russia and Norway.
• Algerian pipeline imports remain low year-on-year.
Europe pipeline imports
Total Russia
mcm/d mcm/d
1,100 700
1,000 600
900 500
800 400
700 300
600 200
500 100
400 0
2014 2015 2016 2017 2018 2019 2020 2014 2015 2016 2017 2018 2019 2020
Norway Algeria
mcm/d mcm/d
400 160
350 140
300 120
250 100
200 80
150 60
100 40
50 20
0 0
2014 2015 2016 2017 2018 2019 2020 2014 2015 2016 2017 2018 2019 2020
Total flows are from Russia, Norway, Algeria & Libya; Russia flows are to Central Europe only Source: Official TSO Statistics 4Russian gas pipeline transit to Europe
• Russia and Ukraine signed a 5-year gas transit deal in Dec-19, easing concerns of a potential disruption to Russian
flows at the start of 2020. The deal includes 65 bcm/a of transport capacity in 2020 and 40 bcm/a during 2021-
2024 (see right chart).
• The Russian TurkStream pipeline saw first gas flows on 01-Jan-20. The two-string pipeline bypasses Ukraine and
has 31.5 bcm/a of capacity. Its start-up has led to a switch in flow direction at the Bulgaria-Turkey border (see left
chart). Previously, Russian gas was delivered to Turkey via Ukraine and Bulgaria. Since the start-up of
TurkStream, Russian gas has been delivered to Bulgaria via Turkey.
• Nord Stream 2: Danish permission to complete the pipeline has been granted. However, uncertainty remains on
start-up.
Bulgaria-Turkey border flows Russian flows through Ukraine
mcm/d bcm
20 100 History Agreement
80
10
60
Bulgaria to Turkey
0
Turkey to Bulgaria
40
-10
20
-20 0
12-Dec 17-Dec 22-Dec 27-Dec 01-Jan 06-Jan 11-Jan 16-Jan 21-Jan 2012 2014 2016 2018 2020 2022 2024
Source: ENTSOG, Official TSO Statistics 5European gas inventories remain significantly above
historic levels
• Robust pipeline imports and record high LNG deliveries in 2019 saw European storage levels reach all time record
highs in 4Q19, with many individual storage facilities reaching full capacity.
• Continued strong supplies have reduced the need for storage withdrawals so far this winter.
• European gas inventories were 21 bcm, or ~33% higher at the beginning of Jan-20 compared to the same time
last year.
European GIE storage
bcm
125
100
75
50
25
0
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
11-15 Range 2016 2017 2018 2019 2020
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 6Strong European storage injections
Germany, France and Spain in particular have sustained high inventories.
Germany France
bcm bcm
25 15
20
15 10
10
5
5
0 0
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
Italy UK
bcm bcm
20 6
15 4
10 2
5 0
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
Netherlands Spain
bcm bcm
15 4
3
10
2
5
1
0 0
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
11-15 Range 2016 2017 2018 2019 2020
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
7LNG send-outs remain strong
• During 2019, European LNG send-outs more than doubled year-on-year, as growing global LNG supply and a
slowdown of LNG demand growth in Asia resulted in a wave of cargoes heading into Europe.
• After reaching a record ~350 mcm/d in Nov-19, send-outs have retracted, although remain historically high.
Monthly European LNG send-outs
mcm/d
400
350
300
250
200
150
100
50
0
2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
UK France Italy Spain Netherlands Belgium Lithuania Poland Portugal
N.B. data does not incorporate all regasification facilities in Europe, but rather can be used as a proxy for LNG send-outs
Source: Official TSO Statistics 8Cumulative HDDs return to historical average
While Nov-19 was colder than average, seasonally mild temperatures since then have brought cumulative HDDs
back to historic average levels.
Europe Cumulative HDDs Europe Cumulative HDDs (Enlarged)
25,000 10,000
9,000
20,000 8,000
7,000
15,000 6,000
5,000
10,000 4,000
3,000
5,000 2,000
1,000
0 0
Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb
'04 - '17 2018 2019 Average '04 - '17
Gas Years
Source: BP Analysis 9Carbon prices stabilise to end 2019 high
• EUA prices were stable during 4Q19, hovering around €25 per tonne.
• Despite volatility earlier in the year, a stable 4Q19 makes 2019 the highest yearly average EUA price ever at
€24.86 per tonne.
EUA carbon futures
€/tonne CO2e
30
25
20
15
10
5
0
2015 2016 2017 2018 2019 2020
Source: ICE 10Cheap gas and high EUAs send gas-coal spread
negative in 2019
• Clean Dark spreads have been considerably negative in Germany and the UK during 2019.
• German Clean Spark spreads were positive on average in 2019 for the first time in many years.
German power spreads UK power spreads
€/MWh £/MWh
30 30
20
15
10
0 0
-10
-15
-20
-30 -30
2014 2015 2016 2017 2018 2019 2020 2014 2015 2016 2017 2018 2019 2020
Gas-coal Clean Spark Base Clean Dark Base
Source: Heren, ICE, EPEX, N2EX 11UK Power generation from renewables grows
• The share of renewable electricity generation in the UK hit a new high in 3Q19, at 39%, 6% points more than in
3Q18.
• Wind capacity and generation continues to grow, with combined onshore and offshore wind power generating
19% of UK electricity in 3Q19.
UK wind capacity & generation Share of UK electricity generation
GWh MW 45%
30,000 30,000
40%
35%
25,000 25,000
30%
20,000 20,000
25%
15,000 15,000 20%
15%
10,000 10,000
10%
5,000 5,000 5%
0%
0 0 2012 2013 2014 2015 2016 2017 2018 2019
2012 2013 2014 2015 2016 2017 2018 2019
Onshore wind Offshore wind
Shoreline wave / tidal Solar
Onshore Wind Offshore Wind Installed Capacity
Hydro Bioenergy and waste
Source: gov.uk 12You can also read
