Page 4 - GLNG Week 12

GLNG COMMENTARY GLNG
European gas prices slump amid COVID-19 lockdowns
Gas prices in Europe have fallen to new historical seasonal lows owing to the COVID-19 pandemic, warm weather, record levels of storage and higher LNG imports
PERFORMANCE
WHAT:
European gas prices have fallen to historic seasonal lows.
WHY:
Lockdowns across Europe have hit demand for gas and gas-fuelled heating, while warm weather, record levels of storage and higher LNG imports have also had an impact.
WHAT NEXT:
The sanctioning of new liquefaction capacity globally will slow in at least the short term.
THE impact of the coronavirus (COVID-19) pandemic has been more profound on oil rather than gas demand.
Efforts to contain and slow the spread of the virus have caused fuel consumption to plunge across Europe, as aeroplanes are grounded and motorists cut back on unnecessary travel. However, the closure of shops, factories and businesses has also sapped demand for gas and gas-derived heating.
Gas prices in Europe have fallen to new his- torical seasonal lows, with average rates at the Dutch TTF hub in March declining to $100 per 1,000 cubic metres and plunging to $90.3 on March 19.
Beyond the pandemic’s impact, Europe’s gas market is also under pressure from warm weather, record levels of storage and higher LNG imports. The continent’s top supplier Gazprom sells most of its gas under long-term contracts linked to oil prices with a six-to-nine month delay. Weak oil prices last year are therefore now beginning to feed into these contracts, driving down the Russian gas exporter’s prices.
The collapse in benchmarks over the past month will also be factored into the contracts later in the year.
Forecasts
Oslo-based Rystad Energy has slashed its fore- cast for growth in gas consumption in Europe to just 0.7% for this year in response to the cri- sis. The consultancy now anticipates demand to total 556bn cubic metres in 2020, down from a forecast of 560 bcm it made before coronavirus containment measures came into force. Europe consumed 554 bcm of gas last year.
Rystad based its predictions on most of the continent’s countries going into lockdown for 30 days during March and April.
“As people stay home and businesses close their doors, demand will decrease for power generation and for burning in the industrial, commercial and residential sectors,” Rystad said.
The lockdown will cause a loss of 4.1 bcm in expected gas demand, reducing the continent’s total usage to 89.2 bcm. Germany, Italy, the UK, France, the Netherlands and Spain will take the biggest hits to consumption levels, according to Rystad. Germany, the biggest gas consumer in Europe, will use 15.4 bcm of gas in March and April, compared with the 16.1 bcm Rystad had previously forecast.
“During the last few days the likelihood of
P4
w w w . N E W S B A S E . c o m Week 12 26•March•2020