Re-balancing in European gas market may take longer than expected
Baku, Azerbaijan, Oct.1
By Leman Zeynalova – Trend:
Re-balancing in the European gas market may take longer than expected, Trend reports referring to Fitch Ratings.
The agency believes that this is due to lower Chinese growth.
“European spot natural gas prices collapsed in 1Q19. Increased supply from new LNG plants in the US and elsewhere was not matched by sufficient demand growth. Prices are likely to rise in 4Q19 when the heating season starts. However, we expect the recovery to be slow given unusually high volumes of gas accumulated in European underground storage facilities and slowing demand. We believe that re-balancing in the gas market may take longer than we had anticipated primarily due to lower Chinese growth,” said Fitch.
China was the major driver for LNG demand and accounted for 48 percent of global demand growth over the past five years (2014-2018), followed by Europe (19 percent) and India (12 percent), according to BP, reads a report released by the rating agency.
“However, Chinese LNG demand may wane because of slowing economic growth amid the US-China trade war. China's authorities expect its annual gas consumption growth to decelerate to 10 percent year-on-year in 2019 from 17.5 percent in 2018,” reads the report.
Wood Mackenzie research and consulting company believes that Chinese gas demand may more than triple if its gas consumption reaches 8-10 percent of the energy mix.
“China is the world’s largest energy consumer, and already Asia’s largest gas consumer, but gas plays a relatively small role in its energy mix – below 8 percent in 2018. However, as part of its energy transition the government is targeting gas consumption to reach 8-10 percent of the mix by 2020, and 15 percent by 2030. If these targets are met, given China’s growth in energy consumption, Chinese gas demand would more than triple,” the company said.
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