European Gas Demand 'Wiped Out' by Virus Lockdowns

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Written by Martin Lynch, European News Editor for Industrial Info (Galway, Ireland)--European gas demand has been nearly wiped out by the continued escalation of the coronavirus pandemic.

Germany, Italy, the U.K., France, the Netherlands and Spain are expected to take the biggest hit in absolute volumes. Overall, as an increasing number of European nations go into lockdown, there will be a combined total loss of 4.1 billion cubic meters (Bcm) in expected demand, a 4.4% drop in pre-coronavirus estimates from Norway's energy consultancy, Rystad Energy. Europe will consume 89.2 Bcm for the period, down from an expected 93.3 Bcm. For 2020, European gas demand is likely to fall by 0.7%. Growth will be limited to roughly 2 Bcm year on year, short of previous expectations for a 6 Bcm increase.

"During the last few days the likelihood of seeing further lockdowns across Europe has increased making this scenario more likely," explained Carlos Torres Diaz, Rystad Energy's Head of Gas and Power Markets. "Also, Italy is about to end its second week of lockdown and it doesn't seem to be coming to an end yet. It is therefore probable to see reduced commercial and industrial activity in countries for a period of at least four weeks."

In terms of industry sectors, the commercial sector will be hit the hardest (-20%), followed by power (-7%), industrial (-5%) and residential (-2%).

Rystad warned that its estimates do not yet assume any demand loss due to lockdowns from May onwards, "which of course carries a significant downside risk in as coronavirus-related restrictions in Europe intensify." European gas prices are already at a record low due to the abundant supplies available to the region, combined with lower demand due to the mild winter, and underground stock levels at historically high levels.

In related news, Russia's expected revenues from oil and gas will be almost $40 billion lower than planned because of falling oil prices. Russia's Finance Minister Anton Siluanov said the country will use reserves from the National Wealth Fund. The ongoing oil feud between Russia and Saudi Arabia is partially responsible for the current, record-breaking slump in global oil prices.

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