The coronavirus outbreak is additionally depressing China’s already slowing gas demand growth to the point that analysts have revised down their estimates for Chinese gas demand growth this year and are warning of a knock-on effect on global liquefied natural gas (LNG) markets.
The reduced industrial and transportation activity amid the coronavirus outbreak—with factories shut, cities locked down, and travel restrictions imposed—has already started to show in China’s gas demand. Moreover, demand will likely continue to be depressed until industrial activities recover fully after the outbreak, analysts told Reuters.
In LNG demand, analysts at Bernstein see China’s demand for the super-chilled fuel rising by just 4 percent annually in 2020, compared to a previous forecast of 13-percent growth.
“Given that 60% of Chinese gas demand comes from power and industry, 2019-nCoV is impacting the gas market at a time of underlying weakness,” Gavin Thompson, Vice Chairman, Energy – Asia Pacific, at Wood Mackenzie, said last week, noting that demand in China was slowing even before the coronavirus outbreak.
In a report this week, WoodMac estimates China’s demand would reduce by between 6 bcm and 14 bcm this year, using a ‘best case’ and more ‘prolonged case’ scenario.
Chinese LNG demand this year is now also expected to be lower than the previous forecast, by between 2.5 Mt and 6.3 Mt, and “this will create a sustained drop not only in North Asian LNG prices, but also at European and US gas hubs prices,” the consultancy said.
The lower LNG imports in China could put the natural gas markets in Europe and Asia under severe stress, Fitch Ratings said on Tuesday.
“This could significantly delay the supply-demand rebalancing expected in 2020,” the rating agency added.
By Tsvetana Paraskova for Oilprice.com