Austrian gas front summer, front year volume to remain high

A total of 123.26TWh changed hands in the 1st 2 months of the current quarter in Austria, up by 52% year on year and more than double compared to 2017. The Austrian market may become highly affected by any disruption in Russian volumes in the coming year due to its limited supply flexibility compared to western markets.

Most Russian supply enters the Austrian grid at the Baumgarten border point with Slovakia, while the country also imports from Germany. If Russian and Ukraine fails to agree on the future of the Ukrainian transit corridor, Austria will likely fully utilise imports capacity with Germany to enable further transits to Italy as well in 2020, leading to potential tightness on the supply side in Austria.

This has already prompted shippers to secure volumes for the coming year. Trade data submitted to ICIS showed that shippers dealt 7.25TWh in VTP Year 2020 volume in April, up from 0.18TWh in 2018 and 0.31TWh in 2017.

The front year volume dropped to 6.90TWh month on month in May, up from 1.66TWh in 2018 and 0.04TWh in 2017. Meanwhile, 6.06TWh changed hands during the 1-24 June period.

FRONT SUMMER

Storage capacity of 3.79 billion cu m (bcm) provides the secondary leg of the Austrian supply portfolio in the winter, with the addition of some local production output. Shippers in Austria have been filling up storage tanks ahead of the coming winter, with storage levels reaching 83% on 24 June.

But with the coming storage period only overlapping one quarter of 2020, shippers have been already pressed to source available volumes for the coming summer.

Liquidity data by ICIS showed that traded volume on the VTP Summer ’20 was 4.02TWh in April, which more than doubled month on month in May. Meanwhile, a total of 4.35TWh changed hands as the front summer volume during the 1-24 June period.

In 2018, shippers dealt 2.13TWh for delivery in the coming summer in April, which later increased to 3.18TWh in May and dropped to 2.26TWh in June. A year before, front summer liquidity was only 0.53TWh in April, rising to 1.03TWh in May and 1.36TWh in June.

Similarly, a total of 7.25TWh was dealt as VTP Year 2020 product in April 2019, which slightly dropped month on month to 6.90TWh in May.

OUTLOOK

There is uncertainty regarding the possible diversion of Russian transit volume through Ukraine destined to central Europe to new routes including the proposed Nord Stream 2 and South Stream Lite pipes.

The delay of the commissioning of the 55bcm/year EUGAL pipeline to 2020, which is expected to deliver the additional volume from Nord Stream 2 pipe to the region, means that Russia may need to rely on the existing Ukrainian infrastructure to meet its contractual obligations towards Austria and Italy.

Ukraine, Russia and the EU are scheduled to hold talks in the 2nd half of September, which may provide some clarity about the supply picture in Austria for 2020.