Highlights

  • Gas demand in Europe's leading markets will continue to fall on an annual basis as the region enters winter
  • Risks of Russian gas supply disruptions to Europe this winter remain
  • Storage volumes are near maximum levels in much of Europe at the start of the heating season
  • European hub prices are low for the time of year, with early winter offering little support for price rises

Economic overview

Continuing economic problems will put further pressure on gas markets in the region, while the Russia-Ukraine dispute is clouding the investment climate.

The UK’s economy is expected to grow by 3.2% this year, according to the International Monetary Fund’s (IMF’s) World Energy Outlook for October. The UK economy grew by 0.9% in the second quarter, beating expectations. While the outlook for the UK is improving, gas demand in the country is still faltering. The improved economic performance is unlikely to reverse the trend.

Year-on-year GDP growth rates

  2013 2014 2015 2016 2017 2018 2019
France 0.3% 0.4% 1.0% 1.6% 1.8% 1.9% 1.9%
Germany 0.5% 1.4% 1.5% 1.8% 1.6% 1.4% 1.3%
Italy -1.9% -0.2% 0.9% 1.3% 1.3% 1.1% 1.1%
Netherlands -0.7% 0.6% 1.4% 1.6% 1.7% 1.9% 2.0%
Spain -1.2% 1.3% 1.7% 1.8% 1.8% 1.9% 2.0%
United Kingdom 1.7% 3.2% 2.7% 2.4% 2.4% 2.4% 2.4%
Source: IMF WEO October 2014

As economies in the eurozone continue to struggle, the IMF’s latest outlook for Germany has been revised downwards. The German economy is forecast to grow by 1.4% in 2014, down 0.5% from the previous projection from July. Sluggish demand for exports, as well as reduced industrial and manufacturing output, have hit the country’s economy. Germany’s gas market has been contracting as a result of the economic slowdown and this is expected to continue.

France’s annual GDP growth in 2014 is expected to be similar to the lacklustre levels it achieved in 2012 and 2013. As a result, the country’s gas market will continue to decline for the remainder of 2014.