Spanish conventional gas demand to continue slide

The Spanish government has tightened the country's lockdown to fight the coronavirus pandemic, which could curb gas consumption further and offset a forecast cool spell in the coming days.

The government has announced new stricter measures, which are to last until at least 9 April, in a bid to slow the rapid spread of the coronavirus across the country.

Some steel companies have already notified customers that they are closing their facilities, after all non-essential businesses were ordered to close. That said, many other gas-intensive industrial sectors are expected to continue production. The chemicals, pharmaceutical, pulp and paper and food sectors — which together accounted for 32pc of Spain's industrial gas consumption in 2018 — will be allowed to continue their operations.

Spanish system operator Enagas today released an operational note alerting market participants to below-average forecast temperatures for the next few days. But while cool weather could lift heating demand, this could be more than offset by a further fall in weather-adjusted consumption because of the more restrictive lockdown measures.

Conventional demand has already slid this month relative to Enagas' expectations. It was 954 GWh/d on 1-30 March, below Enagas' projection of 1.1 TWh/d for the full month.

The drop appears to have been driven by weaker temperature-adjusted demand following the implementation of lockdown measures.

Average overnight temperatures in Madrid, Barcelona, Valencia and Seville were 8.9°C on working days on 16-30 March. The correlation between average temperatures and conventional demand on working days on 1 October 2019-13 March 2020 would suggest consumption of 868 GWh/d at temperatures of 8.9°C. But conventional demand was significantly lower on 16-30 March at 809 GWh/d.

Small and medium-sized enterprises (SMEs) may have led the decline in conventional gas demand so far in the lockdown period. The latest available data show that around 74pc of Spanish SMEs are concentrated in the services sector, which was obliged to close down earlier in the lockdown, while only 8.2pc are part of the industrial sector.

The shutdown of more industrial activities could drive a further fall in gas demand in the coming weeks. And this could more than offset higher residential consumption because of cool weather lifting heating demand.

Power sector gas burn has also slowed in recent weeks, at least partly driven by weaker overall electricity demand owing to measures to limit the spread of the virus.

Coronavirus cases in Spain rose to a total of 94,417 today, the second-highest in all of Europe after Italy, while fatalities stood at 8,189.

By Silvia Fernandez Martinez