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Spain reduces gas-to-power forecast for October by 13% on high gas prices

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Spain reduces gas-to-power forecast for October by 13% on high gas prices

Highlights

Spanish day-ahead gas prices hit record highs

November demand seen up 4% year on year

Enagas holds extra LNG auction to top up storage

Spanish natural gas grid operator Enagas has reduced its forecast for gas-to-power demand for October by 13% to 7 TWh (662 million cu m) amid record high gas prices, reducing its total gas demand forecast for the month by 3% to 30.1 TWh.

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S&P Global Platts assessed the Spanish PVB day-ahead contract Sept. 8 at Eur57.975/MWh, the highest ever assessment for the contract.

The PVB day-ahead assessment was the highest among the Platts-assessed contracts in Europe, having a Eur3.275/MWh premium to the TTF day-ahead price, the highest premium in eight-and-a-half months.

The PVB month-ahead price was also the highest in Europe at Eur56.90/MWh on Sept. 8, and a premium of Eur1.625/MWh compared to the TTF equivalent.

Despite the reduced forecast for gas-to-power demand in October, overall demand is still seen 4% higher year on year in October, Enagas said Sept. 8.

Conventional demand is forecast to be 3% higher year on year at 23.1 TWh and gas-to-power demand 9% higher, due to the contrast with the year-ago month, when Spain declared a state of emergency related to COVID-19, which impacted on economic activity.

For November, Enagas sees gas demand increasing to 33.8 TWh, up 4% year on year due to the economic recovery from COVID-19 restrictions, cooler temperatures and the calendar effect.

These factors will push up conventional demand by 7% to 26.8 TWh, Enagas estimates.

Gas-to-power demand, however, is seen down 6% year on year, largely due to rising wind output, which will increase its utilization rate by nine points from October to 28%, coupled with wet hydro conditions and net power imports. These supply factors are offset by two nuclear outages in the month.

Extra LNG

Meanwhile, in order to replenish flagging underground storage levels, Enagas held a "one-off" auction in which it sold an additional 22 LNG delivery slots, Spanish press reported Sept. 8, citing Enagas CEO Antonio Llarden.

The company did not provide further details when contacted Sept. 9.

According to Spanish daily ABC which cited Llarden, Enagas already had 250 slots allocated for the coming gas year but, after consultation with the government, carried out a confidential auction in which it placed 22 slots from 25 on offer, with nine large shippers obtaining the slots.

Spanish storage sites are currently 70% full, with 24.9 TWh held, according to the company. This compares with a level of 90% at the same stage last year when 32.0 TWh was stored but nearer to the 27.4 TWh or 77% full at the same point in 2019.

Spain could face further potential supply uncertainty due to political issues between Morocco and Algeria, which last month cut ties.

Algeria supplies gas to Spain via the 12 Bcm/year GME pipeline through Morocco, but the transit deal expires at the end of October, meaning Algeria would have to divert all its Spanish gas supply into the newly expanded, 10.5 Bcm/year Medgaz pipeline if the deal is not renewed.