Why did gas demand suddenly increase within a week?

  • From 26 October to 1 November, natural gas demand in northwestern Europe and the UK averaged 624 million cubic metres per day, up 15% week on week and 10% year on year; the main increase came from gas-fired power generation.
  • JPMorgan estimates that wind power output in northwestern Europe and the UK, excluding Denmark, fell 50% week on week over the same period, with other power sources filling the gap. Gas consumption for power generation increased 84% week on week. The bank believes gas-fired plants are easy to dispatch and therefore bore the main burden of making up for the wind power shortfall.
  • Non-residential gas consumption increased as well: Germany rose by 23 million cubic metres per day week on week, the UK by 18 million, and the Netherlands by 14 million.

How did the surge in demand change inventories?

  • The increase in demand exceeded the recovery in liquefied natural gas (LNG) sendout. Although LNG sendout rose 11% week on week and returned to its level a year earlier, inventories in northwestern Europe and the UK shifted from average net injections of 16 million cubic metres per day in the previous week to net withdrawals of 40 million cubic metres per day.
  • JPMorgan believes that week may have marked the peak in the region’s inventories ahead of winter. As of 1 November, inventories stood at 34.3 billion cubic metres, with storage 69% full, below 79% a year earlier and the 92% average for the same period in 2022–2025.

Is this rise in gas consumption representative of the whole of October?

  • Preliminary data for October show that natural gas demand in northwestern Europe and the UK averaged 483 million cubic metres per day, still down about 10% year on year but 17 million cubic metres per day above JPMorgan’s forecast. All of the excess came from a surge in non-residential demand driven by the decline in wind power output at the end of the month; residential demand was broadly in line with the bank’s forecast.
  • Full-month data for the power generation mix also differed from the final week: gas consumption for power generation fell 9% year on year in October, which JPMorgan believes may reflect relatively high natural gas spot prices; over the same period, coal- and lignite-fired generation rose 32% and 12%, respectively.

How did the weather outlook change?

  • The weather outlook for November became warmer over the course of a week: from previously being close to the normal level over the past 10 years, it shifted to an expectation of temperatures about 0.7 standard deviations warmer than the 10-year average. JPMorgan also noted that the weather outlook remains volatile; actual weather in October was broadly close to the 10-year norm.