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European gas demand seen falling over 4% in March and April

European gas demand could fall more than 4% over the next two months as commercial and industrial activity is depressed as more countries lock down to tackle the spread of the novel coronavirus, consultancy Rystad Energy said.

Using the impact on Italy to forecast a picture for Europe overall, the consultancy said gas demand could fall 1.8%, or 38.9 million cubic metres (mcm) a day, in March and April if most countries implement a two-week lockdown between those months.

The more pessimistic scenario of a 30-day lockdown across the continent would translate into a 4.4% drop in gas demand, or 93.6 mcm/day for those two months - equivalent to 41 liquefied natural gas (LNG) cargoes.

In Italy, gas demand has dropped by 12% since the start of its country-wide lockdown on March 10, and power demand by 7%.

“During the last few days the likelihood of seeing further lockdowns across Europe has increased making the pessimistic scenario more likely.” Carlos Torres-Diaz, head of gas market research, told Reuters.

“Also, Italy is about to end its second week of lockdown and ... (it) doesn’t seem to be coming to an end yet. It is therefore probable to see countries have reduced commercial and industrial activity for a period of at least four weeks,” he added.

For 2020 as a whole, Rystad Energy forecasts demand of around 556 billion cubic metres (bcm) from 554 bcm last year.

“Now we expect the growth (this year) to be limited to as little as 0.36%, assuming no demand loss due to additional lockdowns from May, which is of course a significant downside risk and can change in future,” Torres-Diaz said.

Buyers will most likely lower their share of pipeline imports to the extent possible and will also reduce imports of spot LNG cargoes. (Reporting by Nina Chestney; Editing by Mark Potter)

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