Big fall in NW Europe LNG volumes

As oversupply in the LNG market eases and prices recover, there has been a sharp decline in LNG deliveries into NW Europe. The charts show the fall in UK & French LNG sendout volumes since May 2020. Regas terminal send out volumes in these two countries are an important barometer of the volumes of surplus cargoes that are being monetised at NW European hubs. Keep an eye on these terminals into winter as an indicator of the LNG market supply & demand balance.

European EV market share rising fast

A study released this week by policy group Transport & Environment shows a tripling in EV share of sold vehicles across Europe in 2020. The forecast incorporates actual data to the end of Q2 2020 (bottom chart), with UK, Italy & Germany leading the charge. The EV share of European vehicle sales is forecast to rise from around 3% in 2019 to more than 15% in 2021 as shown in the top chart. The surge in EV sales is being driven by a tightening of EU average vehicle emissions standards, pushing supply side response from car manufacturers to accelerate EV model production & sales. This pace of EV growth has important implications for electricity demand growth and load shape.

European LNG imports down in Q3

Last winter saw new records set for LNG imports, as surplus cargos continued to flow into European hubs. The Covid demand shock saw that continue into Q2, but imports have fallen since June. Three reasons have contributed: (i) shut in of US export volumes has eased the cargo surplus since Q2 (ii) spot Asian LNG demand has recovered into Q3 (iii) there have been some significant supply outages e.g. 8mtpa across Gorgon & Prelude in Australia. LNG import volumes will be a key barometer for European gas market pricing into winter.

Russia has turned the gas taps down

Gazprom has been very successful in boosting gas exports to Europe across the 2017-2019 period.  This came at a cost in 2019 as high Russian flows and large volumes of surplus LNG coincided, driving European hub prices ~50% lower across the year. Europe has absorbed large volumes of surplus LNG again in 2020, but Gazprom’s strategy has changed.  The chart shows a substantial year on year decline in Russian imports so far in 2020, mostly via the Ukraine/Slovak swing route. We are watching closely to see if Russian flows follow prices higher as the Covid recovery takes hold.