Industry remains cautious with gas consumption despite lower prices

Industry remains cautious with gas consumption despite lower prices
Industry remains cautious with gas consumption despite lower prices
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Large industrial companies are not increasing their fuel consumption, while the worst of the energy crisis in Europe is behind us and the price of gas has fallen sharply. However, price fluctuations on the gas market are still greater than before the energy crisis. Major gas customers, such as steel and chemical producers, therefore remain reluctant to let their companies run at full speed again, says Morgan Stanley commodity strategist Martijn Rats.

“Returning industrial activity requires a certain degree of confidence that prices will remain stable,” Rats said. According to him, the strong price fluctuations that followed events in the Middle East, for example, make it difficult for companies to hedge against this. “It is not about the absolute price level, but about the expected volatility on the markets,” says Rats.

Although the level of activity in the European industrial sector has recently increased, gas consumption is still historically low. “It’s disappointing how much prices have fallen and demand for gas hasn’t really returned,” Rats said.

Demand for gas is being depressed by a number of factors, including an increase in the generation of sustainable energy and a predominantly mild winter, which means less gas is needed for heating. Many companies and households have also started looking for alternatives due to the high gas prices caused by the Russian invasion of Ukraine in 2022.

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