Highlights

  • Demand growth is easing after April's cold snap
  • Storage volumes are rising – but at a slow pace
  • Production from Groningen shot up in April – boosting Dutch production
  • European hub prices are falling after substantial rises in April

Economic overview

Europe’s major economies are struggling to grow and will see limited improvement next year.

France’s GDP growth will be flat this year, according to the latest outlook from the International Monetary Fund. The country’s economy will expand by 1.1% in 2016 and could see slight improvements in 2017, when GDP is forecast to grow by 1.3%. Weak industrial output is weighing on the country’s economic growth, and despite low oil and gas prices providing support, expansion will remain moderate through 2018 – when GDP growth is forecast to rise to 1.5%. France’s gas demand received a boost from the cold weather in April, but the limited economic growth will do little to support gas market expansion this year.

Europe GDP forecast

  2015 2016 2017 2018
France 1.1% 1.1% 1.3% 1.5%
Germany 1.5% 1.5% 1.6% 1.4%
Italy 0.8% 1.0% 1.2% 1.0%
Netherlands 1.9% 1.8% 1.9% 1.9%
Spain 3.2% 2.6% 2.3% 2.0%
UK 2.2% 1.9% 2.2% 2.2%
Source: IMF WEO, April 2016

Germany will also see little growth, with GDP forecast to increase by 1.5% this year and 1.6% in 2017. The country’s trade surplus hit a record high in March, but growth is being weighed down by weak industrial output, which contracted over the month. The country’s gas demand was boosted at the start of Q2 by the cold weather that hit much of the region, but as the northern hemisphere moves towards summer, demand will continue to weaken.

The UK’s GDP growth is forecast to fall to 1.9% this year, down from 2.2% last year, weighed on by weak exports and a growing trade deficit. The value of UK imports rose by £1.9 billion ($2.7 billion) in Q1 2016, while exports grew by just £500 million. Weak demand for exports, combined with the strengthening of the pound, has hit the country’s revenues. Although the weak economic growth is likely to limit energy demand, there is still scope for gas market expansion this year. Strong offtake from the power sector looks set to continue and will boost total UK gas demand.