Prices favour strong Norwegian exports to Europe in August-September, which could boost the UK's supply. But this could be more than offset by sustained low regasification and domestic output, leaving the UK with less surplus gas than in previous years.
And firms may continue to prioritise directing any spare supply into mid-range storage rather than exporting it to mainland Europe, similar to July.
Barely any cross-Channel flows could curb supply available to add to EU storage compared with recent summers, when summer exports had been consistently quick.
That said, the slump in BBL and Interconnector exports this summer may have been partly the result of a reconfiguration of flows around northwest Europe, with more LNG going directly to mainland Europe, which may otherwise have been sent to the UK and then on through the Interconnector to Belgium or the BBL to the Netherlands. The lack of a UK short-haul mechanism — discounting bookings at entry and exit terminals in close proximity — has made exports to the EU much less economical this summer than in previous years (see UK flows graph). A new short-haul tariff regime will be introduced from 1 October.
UK to have limited surplus supply
While Troll and Oseberg output being maximised could boost the UK's Norwegian receipts compared with previous years, supply from other sources could stay weak.
Northwest European prompt prices holding substantial premiums to respective front-summer contracts in recent weeks has incentivised Norwegian state-controlled Equinor to maximise production from the flexible Troll and Oseberg fields (see Norwegian July exports graph).
Norwegian output could slip in August-September — albeit still remaining well above previous years — as Troll constraints are expected to reduce available capacity on most days. This could drive Norwegian production down to slightly below 310mn m³/d in August and 320mn m³/d in September, assuming prices continue to incentivise maximising flexible output (see Troll maintenance graph).
Cross-channel differentials favour deliveries to the EU ahead of the UK in August-September. But even assuming EU flows are largely maximised, this could leave just under 60mn m³/d for the UK in August and about 70mn m³/d in September.
Domestic production could rebound in August-September from June-July, but stay much weaker than in recent years. It could return in line with just under 74mn m³/d on 1 April-24 May before lengthy works on the Forties Pipeline System began.
Sendout could remain as weak in August-September as it was in July, as Asia's cooling season continues to pull cargoes away from the Atlantic basin (see LNG sendout graph). UK sendout has slumped to just above minimum boil-off at South Hook this month, with a single cargo unloaded in July so far.
Aggregate consumption — including Moffat deliveries — could be roughly in line with the 2017-19 average. Consumption had been particularly high in the third quarter of last year.
Mid-range injections to be strong
Low mid-range stocks could result in firms maximising injections over the rest of the summer, especially given limited Interconnector and BBL bookings.
Based on the assumptions outlined above, the UK could have about 22mn m³/d of spare supply — for either injections or exports — in August, and 9mn m³/d in September (see UK supply vs demand graph).
Just 635,000 m³/d of combined BBL and Interconnector capacity has been booked towards the EU for August-September. Cross-Channel differentials would need to open up much wider to incentivise additional bookings.
In any case, despite 11.9mn m³/d of BBL capacity being booked for July, exports still averaged much lower at 4.6mn m³/d on 1-25 July, with firms prioritising injections on days when the UK has had ample spare supply to offload.
Mid-range stocks were 431mn m³ yesterday morning, or 29.5pc of nameplate capacity. This would leave ample room for brisk injections in late summer.