Moscow: The world’s natural gas demand this year will experience the harshest contraction in history and will amount to 150 billion cubic meters or 4 percent year-on-year, sparked by the COVID-19 pandemic and the economic slowdown, the International Energy Agency (IEA) said on Wednesday.
“Global natural gas demand could fall by about 150 bcm/y or 4 percent y-o-y in 2020, based on our broad assumptions for the year and latest market observations … The magnitude of the impact remains however unprecedented: this would be the largest recorded annual decrease in consumption since the natural gas market developed at scale in the second half of the 20th century, ” the IEA report read.
The demand will fall mostly in the European, Asian and North American regions and that already has an impact on gas prices, according to the agency.
The combination of continued strong supply growth, mild winter temperatures and the imposition of Covid-19 related lockdowns pushed natural gas prices to lows not seen in over a decade across all major consuming regions. In the United States, Henry Hub prices in Q1 2020 fell by over 33 percent y-o-y to an average of USD 1.9/MBtu, its lowest quarterly price level since 1999,” the IEA noted.
However, the gas demand is expected to gradually recover in 2021, however, the COVID-19 will have a long-lasting impact on the market for natural gas. The agency has lowered its forecast for average annual growth rate for the 2019-2025 period from the initial 1.8 percent to 1.5 percent annually.
“Even if most of the 2020 losses are to be recovered in 2021, the Covid-19 crisis has longer-lasting impacts on natural gas demand growth. This results in about 75 bcm/y of lost growth over the forecast period – more than the equivalent of incremental demand for 2019,” the report read.
Global energy demand has suffered this year greatly due to the COVID-19 pandemic. The IEA said in April that it expected the energy demand to fall by 6 percent in 2020 in what might be the biggest drop in 70 years.