Oil & Gas

06 May 2021

Italy’s April Gas Imports Hit Long-Term High

06 May 2021  by   

Italy's gas imports in April were the quickest for any month in almost nine years, because of strong heating demand and the need to start injecting under the country's regulated storage system.

Aggregate deliveries — combining pipeline gas and LNG sendout — of 233.6mn m³/d were the highest for any month since February 2012, when they had hit 259.8mn m³/d.

Imports were also the strongest for any April in at least 15 years, jumping more than 36mn m³/d above the five-year average for the month.

Cool weather buoyed heating demand last month, with overnight temperatures in Milan of 7.4°C, below the seasonal norm of 9.3°C. Deliveries to local distribution networks of 90.3mn m³/d were 28mn m³/d above the five-year April average. And demand from the power sector and industry each surpassed recent-year averages (see April demand graph).

Italy's import needs were particularly strong relative to other European markets — where the weather was also unseasonably cool — because of the rigidity of its regulated storage system.

While storage sites elsewhere in the region switched to net withdrawals — with Europe as a whole registering its first net April stockdraw since at least 2011 — Italian injections began.

Storage capacity at sites operated by Stogit is subject to a regulated injection profile, with minimum and maximum stock targets for each summer month. This resulted in firms having to maintain at least modest injections throughout last month to avoid having to pay fines, even as PSV everyday prices held a premium to contracts for delivery next winter on most days, which would have otherwise discouraged injections (see spread graph).

In any event, firms cumulatively missed the 1 May monthly minimum stock target set by Stogit, with the April stockbuild firmly below average.

Import bonanza

Deliveries from all of Italy's supply sources had to climb last month to provide sufficient gas for injections, alongside strong consumption (see imports graph).

Receipts were particularly strong at Tarvisio, where mostly Russian gas enters Italy. PSV everyday prices consistently held a large premium to the TTF front-month index's April settlement of €17.524/MWh, encouraging quick Russian nominations by firms with hub-linked contracts.

Algerian deliveries at Mazara were also quick, jumping to 62.4mn m³/d from the five-year April average of 38.7mn m³/d. Algerian gas — which is supplied to Italian firms under hybrid oil and hub-linked contracts — was firmly competitive in the country's supply mix.

And April regasification was the strongest for any month since July last year. The country's three LNG terminals received 18 deliveries last month, or 2.1mn m³ of LNG (see Data & Download).

Imports through the Trans-Adriatic pipeline ramped up to 16.9mn m³/d, the highest for any month since flows started in late December. And deliveries from northwest Europe, Italy's marginal supply source, also had to quicken from the winter.

May's outlook

An exceptionally quick stockbuild — following strong uptake of storage capacity for injections in May alone — could lift the call on imports again this month.

Stogit may have decided to lower its reserve price at its auction for May capacity late last month following limited uptake at previous tenders, which drove substantial allocations. Commercial injection capacity at Stogit's sites is 81.5mn m³/d for this month, which would allow for injections to more than double from April's 36.9mn m³/d.

That said, the increase in the stockbuild could be offset by a slowdown in consumption as the weather turns warmer.

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