European gas demand loses lockdown support, but remains robust

London — Coronavirus pandemic lockdowns are currently having little impact on natural gas demand in Europe, a fresh regression analysis of S&P Global Platts Analytics data showed, with January demand turning-out in line with seasonal expectations despite being previously supported in the second wave of COVID-19.

With the most stringent measures being imposed in Europe by national governments since the first wave struck in March, gas consumption has remained remarkably robust compared to the situation during the first peak.

Daily aggregated demand excluding storage in France, Germany, Spain, Italy, Belgium, the UK and the Netherlands was 4.3 million cu m/d lower than pre-second wave expectations in January, after normalizing historical data for all months according to daily temperatures.

When isolating just January data for the analysis, this resulted in a gain of 8.94 million cu m/d compared to what might be expected for the time of year.

These both represented a step-down from December, which experienced a 38 million cu m/d uplift in demand compared to expectation, amid less economically disruptive pandemic containment measures, and a slightly higher average temperature.

The entire second wave, however, has seen a clear pattern emerge, whereby overall demand falls further below expected at the coldest temperatures, while enjoying additional consumption levels in milder conditions.

While this may seem counter-intuitive with more people working from home, it must be borne in mind that the analysis represents little deviation from heating demand for the time of year, therefore requirements for domestic heating as they are now would have been adopted anyway, if historical data is anything to go by.

December had shown signs of demand damage as Europe began to tightening restrictions in the second half of the month. The support it had originally enjoyed has now all but vanished, January data indicates.

The first wave of the pandemic struck in milder weather conditions but nevertheless reduced European demand by around 100 million cu m/d.

When considered alongside the latest data, demand is most damaged when the economic impact of COVID-19 restrictions are at their most severe.

Therefore, it is possible to conclude that this economic impact has been neutralized by some element of restructured demand, be it in domestic heating habits or power generation requirements.

By region, the data showed that UK Local Distribution Zone (LDZ) demand was the worst affected by the restrictions, closely followed by Spain.

This was offset by stronger LDZ demand in Italy, and German requirements still higher than expected despite receding from the December increment.

Industrial demand was also most adversely affected since the first wave of the pandemic, and accounted for nearly all aggregate demand losses compared to pre-pandemic expectations.