The demand for gas in Europe collapses due to the economic crisis
Despite the lowest natural gas prices in the last two years, the demand for natural gas in Europe continues to be weak and decreased in May compared to a year earlier, due to the slowdown of industries and the entry into recession of the main economies.
Demand for natural gas in Europe's largest economies – Germany, the UK, France, Italy, Spain and the Netherlands – fell 9.7% last month compared to May 2022, according to data from S&P Global Commodity Insights cited by Bloomberg .
At this time last year, gas demand in Europe was depressed by soaring natural gas and spot LNG prices and calls for energy savings to weather the winter without bulk gas supplies from pipelines Russians. This year, prices have fallen to levels prior to the energy crisis that began in autumn 2021 and peaked in 2022 after the Russian invasion of Ukraine. However, the lower prices of the last two years have not stimulated gas consumption as European industries and economies are entering a slowdown linked to the economic recession.
Due to continued high inflation, Germany, Europe's largest economy, entered a recession, with GDP contracting by 0.3% in the first quarter of 2023 and by 0.5% in the fourth quarter of 2022 , according to government data late last month.
Updated Eurostat data for Germany and Ireland showed on Thursday that the eurozone had also entered a recession, with GDP contracting 0.1% in Q1 2023 after contracting 0.1% in Q4 2022 .
Weak growth or a deepening recession could mean that industries won't increase their use of natural gas.
Front-month futures on the TTF hub, the hub for gas trading in Europe, were trading at $31.20 (€29) per megawatt-hour (MWh) at 10:39 GMT on Friday. Prices are now much lower than their August 2022 record of more than $323 (300 euros) per MWh, but have risen this week due to maintenance of Norwegian gas fields and a French LNG import terminal.
An increase in gas prices, however, will only occur in the event of an increase in demand, for greater domestic or industrial use, or for restrictions on supply. However, a summer that started cool and rainy contained energy consumption for air conditioning and the increasingly evident economic and industrial slowdown makes an increase in industrial demand unlikely, while unpleasant surprises can always arise on the supply side.
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The article Gas demand collapses in Europe due to the economic crisis comes from Scenari Economici .
This is a machine translation of a post published on Scenari Economici at the URL https://scenarieconomici.it/crolla-la-domanda-di-gas-in-europa-a-causa-della-crisi-economica/ on Sat, 10 Jun 2023 07:00:57 +0000.