Europe’s industrial demand for natural gas is not expected to recover to pre-2022 levels, despite the current low-price environment likely to stimulate a slight increase in consumption. European natural gas prices are generally not expected to see any sharp increases through the summer, but the expiry of the Russia-Ukraine gas transit deal could test the region if the winter is cold.
Source: Energy Intelligence
Natural gas demand is recovering in the petrochemical and fertilizer industries, as well as refineries, due to the low gas prices taking effect at the start of the year, Marco Saalfrank, head of merchant trading at Swiss trader Axpo, said on the sidelines of the E-World energy trade fair held in Essen, Germany, last month. “We really see an improvement in demand, when corrected by the effect of the mild winter,” he said. Analysts at HSBC Global Research said in a recent research note that EU industrial demand rebounded year on year in January, but retreated in February and was 23% under the 2017-21 average.
This week, the European Council agreed to extend voluntary gas demand cuts by member states until Mar. 31, 2025, with a target to reduce consumption by at least 15% compared to their average gas consumption in the period from Apr. 1, 2017, to Mar. 31, 2022. “Although security of supply in the EU has improved, continued demand reduction is still needed to secure sufficient gas storage for next winter,” the council said.
However, industrial demand in Europe is not expected to go back to levels before the Russian invasion of Ukraine in February 2022, “and the trend is clearly down in the mid- to long-term,” Saalfrank said. Industrial end-users took a hit from the high prices in 2022 and 2023, and since the strategies of large industrial players are not in short cycles and coupled with the EU’s energy transition and sustainability goals, demand is unlikely to recover, the Chief Executive of Met Germany, a subsidiary of Switzerland-based trader MET Group, Joerg Selbach-Roentgen, told Energy Intelligence. “Demand as we knew it is gone,” he added.