Highlights

  • Gas demand from Europe's largest markets will see limited grow in Q1
  • Europe will remain well supplied this winter despite cuts to Groningen's output
  • Drawdowns on stocks have picked up pace but storage volumes are still healthy
  • Colder temperatures will not be enough to boost hub prices in Q1

Economic overview

Eurozone economies will expand at an increased pace this year.

The GDP of countries in the eurozone is expected to grow by an average of 1.7% this year, up from an estimated 1.5% in 2015, according to the World Bank’s January Global Economic Prospects forecast. The low global oil price is helping the economies of EU member states to improve growth. Consumer spending has increased and unemployment has dropped, both of which will support steady economic expansion this year and next, when GDP growth is also expected to be around 1.7%. The higher rate of growth will support the region’s gas markets to expand slightly. However, Europe is not expected to significantly increase its appetite for gas this year.  

Europe GDP growth forecast

  2015 2016 2017 2018
Euro area 1.5% 1.7% 1.7% 1.6%
UK 2.4% 2.4% 2.2% 2.1%
Russia -3.8% -0.7% 1.3% 1.5%
Source: World Bank Global Economic Prospects, January 2016

The low oil price will damage parts of the UK’s economy. The country’s GDP is expected to grow by around 2.4% this year, the same as in 2015. Lower oil prices will reduce costs and support growth in some sectors. However, Scotland has been harder hit – substantial job losses in the oil industry mean it has higher unemployment and lower consumer spending than elsewhere in the UK. The UK’s tax revenues from oil production are also falling. Despite this, the country may use more gas this year. Consumption from the UK’s power sector is expected to improve in 2016 because the drop in NBP prices is helping to make gas more competitive against coal.