Global natural gas markets are facing the largest demand shock in recorded history. According to the International Energy Agency's (IEA) new Gas 2020 report, consumption of natural gas is expected to drop by twice the amount it did after the 2008 financial crisis.
The coronavirus pandemic and an exceptionally mild winter in the northern hemisphere are setting the stage for the largest recorded demand shock in the history of global natural gas markets, the agency said.
Global natural gas demand is expected to drop by 4 percent year on year, or by 150 billion cubic meters, in 2020. This would represent twice the amount of demand lost after the 2008 financial crisis. Gas demand in all regions will be hit, but the biggest impact will be felt in mature markets across Europe, North America, Asia, and Eurasia which together will account for about 75 percent of lost gas consumption this year, the IEA said.
Natural gas demand growth had already slowed down in 2019 to 1.8 percent annual growth, after a 5-percent jump in 2018.
At the beginning of 2020, natural gas demand was already weak due to uncharacteristically mild winter in the northern hemisphere, and then came the COVID-19 pandemic to further hit demand, due to the lockdowns around the world and the reduced economic activity, the IEA said. Related: World's Largest Oil Trader Sees Profits Plunge 70%
"Faced with this unprecedented shock, natural gas markets are going through a strong supply and trade adjustments, resulting in historically low spot prices and high volatility," the agency said.
"Natural gas has so far experienced a less severe impact than oil and coal, but it is far from immune from the current crisis. The record decline this year represents a dramatic change of circumstances for an industry that had become used to strong increases in demand," the IEA's Executive Director Fatih Birol said in a statement.
"The Covid-19 crisis will have a lasting impact on future market developments, dampening growth rates and increasing uncertainties," Birol said.
By Tsvetana Paraskova
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Tsvetana is a writer for Oilprice.com with over a decade of experience writing for news outlets such as iNVEZZ and SeeNews. More