May 18, 2020 / 5:41 PM / 15 days ago

Global gas demand to shrink by 2% this year amid pandemic - research

LONDON (Reuters) - Global demand for natural gas is expected to fall by almost 2% this year as commercial and industrial activity is reduced amid coronavirus lockdowns, consultancy Rystad Energy said on Monday.

Global gas demand could total 3,878 billion cubic metres (bcm) in 2020, down from 3,951 bcm last year, the consultancy forecast. Before the coronavirus outbreak, demand was expected to grow to 4,038 bcm.

“2020 will be the first year since 2009 where there will be no growth in consumption. This will be a hard blow for an industry accustomed to yearly growth rates of more than 3%,” said Rystad Energy’s head of gas and power markets Carlos Torres-Diaz.

However, gas remains competitive to other sources of energy, especially in the power sector where gas use has remained relatively stable in most countries, he added.

Although gas demand in Europe has slumped, demand in the United States remains resilient, mostly as a result of increasing demand from the power sector which has compensated for a drop in other sectors.

Gas demand from the U.S. power sector has averaged 25 billion cubic feet per day (708 million cubic metre per day) over the last two weeks, in line with last year’s level.

Natural gas production is estimated at around 4,000 bcm this year based on lower investment activity in the exploration and production industry.

As storage capacity is very full, producers are expected to push volumes into the market.

“This could trigger a demand response to absorb the additional volumes, but this will be very dependent on gas prices remaining competitive to coal,” the report said.

Dutch gas prices, the European benchmark, are expected to average $3.3 per million British thermal units (MMBtu) and Asian spot prices to average $3.8/MMBtu this year, below the range at which coal-to-gas switching takes place in most countries.

Reporting by Nina Chestney; Editing by Mark Potter

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