Soaring natural gas prices, demand destruction in the industrial sector, and energy-saving measures are set to reduce gas consumption in Europe’s developed economies by 10% this year, the biggest drop in European demand in history, the International Energy Agency (IEA) said in its quarterly Gas Market Report on Monday.
The forecast of a 10% decline in natural gas demand in OECD Europe reflects the expectation of higher gas prices and the EU’s ambition to reduce gas consumption by 15% between August 2022 and March 2023 compared to its five-year average.
“Assuming average weather conditions, gas demand in the residential and commercial sectors is expected to remain below 2021 levels,” the IEA said in its report.
Due to sky-high high prices and a very tight gas market, natural gas usage in the power generating sector in Europe is forecast to drop by nearly 3% this year. Industrial gas demand is expected to plunge by as much as 20%, the IEA said.
Energy-intensive industries in Europe, including aluminum, copper, and zinc smelters and steel makers, have already warned EU officials that they face an existential threat from surging power and gas prices.
After a record slump in gas demand this year, Europe faces another year of gas consumption contraction in 2023, when OECD Europe’s demand is forecast to decline by 4% amid high prices, according to estimates from the IEA. The agency also noted that “Further potential disruption to the supply of Russian gas provides additional downside risk to this outlook.”
Keisuke Sadamori, the IEA’s Director of Energy Markets and Security, commented on the report: “The outlook for gas markets remains clouded, not least because of Russia’s reckless and unpredictable conduct, which has shattered its reputation as a reliable supplier. But all the signs point to markets remaining very tight well into 2023.”
The IEA’s Executive Director Fatih Birol said last week that the gas market could be even tighter next year compared to already tight LNG markets in 2022.
