Summer spot gas prices at the Dutch TTF trading hub are likely to plunge towards €9/MWh as the coronavirus outbreak in China effectively keeps displacing LNG cargoes to Europe. At these record low fuel prices, gas power plants with just 57 percent efficiency would be “in the money” for peakload power generation in most of 2020.
Abundant production and mild temperatures has left working gas in storage in the Lower 48 states at 12 percent higher levels at the end of the winter heating season than the previous five-year average. Some 1,935 billion cubic feet (Bcf) of gas are forecast to remain in storage at the end of March, despite rampant pipeline gas sales to Mexico and LNG exports.
Though Chinese workers have returned to factories of Airbus, General Motors and Toyota in recent days, many remain shuttered due to coronavirus quarantine measures. The recovery of Chinese gas demand is likely to stay subdued well into March, Energy Aspects says, forecasting a drop in LNG offtake volumes at least until early April.
The OPEC+ alliance, dominated by Saudi Arabia and Russia, is reacting to the global coronavirus spread by considering additional cuts to oil and associated gas production. As an emergency measure, crude oil output could be cut by 0.6 million barrels per day (mb/d) on top of the 1.7 mb/d already pledged, in a bid to stabilize prices.
Energy intensity keeps falling in the United States, with the Government forecasting energy consumption will grow more slowly than gross domestic product (GDP) through 2050. In the AEO2020 High Economic Growth Case, more effective energy use of U.S. industry is set to lower energy intensity by 1.6 percent annually.
The International Energy Agency (IEA) has urged German policy makers to promote the development of hydrogen technology and start importing LNG to advance its energy transition. The IEA lauded Germany’s “extraordinary progress with renewables,” but noted the “nuclear phase-out as well as higher electricity exports have offset some of the emissions benefits."
Not much unabated gas (without CCS) will be burnt in the European Union after 2040, as industry and transport sectors will be electrified to comply with low-carbon regulations, Energy Aspects finds. While Europe seeks to boost electricity in end-use sectors to 27 percent, and ultimately 30 percent, China and India just started on their electrification journey.
The Chinese Government is open to applications for tariff exemptions on several U.S. products, including crude oil and LNG, starting from March 2, 2020. The long-anticipated announcement was widely welcomed by traders, though there are concerns about long-term demand destruction due to the coronavirus outbreak.