Coronavirus fails to pull down Italy’s demand significantly

LONDON (ICIS)–The Italian wholesale electricity market has so far avoided major losses following the outbreak of the Coronavirus in the country, the strongest so far across Europe.

This is despite countrywide shutdowns of public areas, such as schools and workplaces.

DEMAND REACTS SLOWLY

Differently from what may have been expected, neither gas nor power demand appeared particularly affected by the outbreak, as energy-hungry industrial users and power plants have remained largely in place.

Power load averaged 37.14GW from 1 February to 22 February, while it stood at an average of 36.95GW from 23 February to 4 March, as showed by data from grid operator Terna.

The date of 23 February was selected to assess a potential demand slump as the first decree containing preventive measures was published on that day.

As for gas, domestic demand inched down after the virus gained traction and measures started to be adopted.

Data from grid operator SNAM Rete Gas showed that gas demand averaged 2,800GWh or 260 million cubic metres (mcm) per day from 1 February to 22 February, and settled around 2,600GWh (241mcm) per day between 23 February and 4 March.

Historical data for the period between 23 February – 4 March since 2015 showed that both gas and power demand were significantly higher on average, with gas demand averaging 4,200GWh (390mcm) and electricity load 37.46TWh.

Nevertheless, the more significant gap in gas demand looks mostly due to record high demand in 2015.

Overall, energy demand after 23 February has not suffered as much as could have been anticipated.

A BIGGER IMPACT ON THE HORIZON

With Italy’s power demand staying little changed, the virus has so far had no major impact on wholesale power prices.

But the Italian front-quarter contract has fallen in the recent sessions.

According to Confindutria, Italy’s leading manufacturers’ lobby, industrial output could be expected to slow down in Q2 ’20.

The Italian Q2 ’20 product fell 6% since 24 February. It is possible to expect further downside as the contract approaches expiry at the end of March.

Out of the three contracts making up the Italian Q2 ’20, June ’20 posted the biggest losses.

MARKET VIEW

Despite the magnitude of the virus outbreak in the country, Italian traders are still reluctant to quantify the potential impact on power prices.

The majority of traders polled by ICIS excluded any correlation between ongoing bearishness and lower-than-expected demand due to preventive measures.

“Prices are quite down but it does not seem to be linked much to demand – 0.6-1.2GW is not that much,” a trader said, adding the bearishness had more to do with surging hydro rather than with squeezed demand.

“So far industrial demand has not been impacted very much. When and if it does, we will see a different scenario,” he said.

Meanwhile, an amendment to the initial decree of 23 February extended school and publish spaces closure until 15 March.