London — Belgian natural gas prices for month-ahead delivery in August rose by 49% year on year, with the contract averaging 62.424 p/th during the month, according to S&P Global Platts price data.
This constituted an increase of 8.7% from the equivalent July average, although these gains were not enough to maintain the basis at July levels, with Zeebrugge's discount to the NBP more than doubling to 0.694 p/th.
The average for the day-ahead contract also saw strong gains, rising 8% month on month and 47% year on year to 61.273 p/th, with the basis marginally widening to a 0.793 p/th discount, largely mirroring the pattern seen on the NBP.
Supporting spot prices in Belgium were a jump in gas-to-power demand amid reduced power plant availability in Europe, with CCGT consumption up 37% year on year at 354 million cu m, and a fall in interconnector imports from the UK by 21% year on year and 23% month on month to 1.11 Bcm. This reflected the higher profitability of keeping gas in the UK compared to selling it in Belgium, a trend that began in July.
Meeting the increase in demand for power appears to have been a step-change in LNG sendout from the Zeebrugge LNG terminal.
Regasification more than doubled from August 2017 levels to 170 million cu m. This was 50 million cu m more than July's sendout, comfortably covering higher CCGT demand.
In a fundamental change of flows, transportation activity at the Eynatten interconnection point on the German border intensified, with imports and exports both increasing year on year by 90% and 88% respectively, and seeing much higher overall activity than in July. In terms of exports, Germany was now a preferred destination ahead of France, whereas Belgium sourced more gas from Germany and less from the UK than in August 2017.
Belgian storage may be a partial explanation for this change, since injections were 48% lower year on year, only slightly higher in total than July, at 70 million cu m. The heightened activity in both directions at the German border may indicate a utilization of German storage, both for short-term balancing and longer-term seasonal usage.
With UK imports opening September below August's levels, and the expiry of long-term contracts on the bi-directional IUK interconnector pushing up transportation costs and NBP prices, Belgium's vulnerability to price movements in the UK and Europe could grow as a result of the country's import dependency. With upward momentum continuing on the NBP on Tuesday, the Belgian hub will doubtless be affected if it needs to compete to bring gas to the country.
