The global natural gas industry is heading to a major shock this year, with demand on course for its largest annual decline in history, the International Energy Agency (IEA) said in a new report today.
According to the Gas 2020 report, published on Wednesday, global gas demand is set to fall by 4% or 150 billion cubic meters in 2020. This is twice the amount lost after the 2008 financial crisis, Kallanish Energy learns.
The decline is driven by the Covid-19 crisis and an exceptionally mild winter in the northern hemisphere. Europe, North America and Asia are set to see the biggest drops in demand. Together they account for 75% of the total decline in gas demand this year.
The European gas market is facing “the perfect storm” since early 2020, the IEA said. Mild temperatures, strong wind generation and the lockdowns have depressed gas consumption in the region. Demand contracted 7% year-on-year in the first five months of 2020.
The U.S. gas market has been a bit more resilient, mainly due to the ongoing coal-to-gas switch in the country. From January to May, U.S. gas consumption declined 2.8% y-o-y.
The IEA estimates that both the European and North American gas markets will see a demand loss of over 40 Bcm each this year. The hardest hit sector is the power generation, followed by the residential and commercial sector, and the industrial sector.
“Natural gas has so far experienced a less severe impact than oil and coal, but it is far from immune from the current crisis,” said IEA’s executive director Fatih Birol. “The record decline this year represents a dramatic change of circumstances for an industry that had become used to strong increases in demand.”
The Paris-based agency expects demand to rebound in 2021, but it won’t be a rapid return to the pre-crisis trajectory. Asia, particularly China and India, is set to lead demand growth from next year onwards. Strong policy support in these countries will boost gas consumption, especially in the industrial sector.
“Although confinement measures are being gradually lifted, our forecasts do not assume that economies recover promptly,” the report noted.
This post appeared first on Kallanish Energy News.
