Global natural gas demand is likely to decline this year due to high prices and market disruptions caused by Russia’s invasion of Ukraine, according to the International Energy Agency (IEA).
The IEA revised this year’s forecast for natural gas consumption growth in its latest quarterly report to slightly below zero from its previous estimate in January of 1%. The agency expects gas demand to remain flat at 4,086 billion cubic meters (Bcm), or about 144.3 Tcf in 2022.
“Almost all regions have been revised downwards, with a large share of the impact in the Asia Pacific region, on a combination of a downgraded economic outlook from high commodity prices and the risk of physical limitations on access to liquefied natural gas (LNG), especially for price sensitive buyers with a higher exposure to short-term LNG procurement,” IEA said.
Overall, natural gas consumption is expected to fall by 6% in Europe this year. In Asia, demand is expected to grow by just 3%, compared to 7% annual growth in the region last year.
A drop in global demand follows a 4.5% year/year increase in 2021, when gas consumption rebounded along with more economic activity as Covid-19 restrictions eased across the world.
The agency noted that average LNG spot prices in Asia this past winter were more than four times their five-year average. In Europe, prices were five times the five-year average during the heating season.
Even still, IEA is forecasting that global LNG trade will increase by 5% this year, or just below the 6% annual growth rate in 2021. Europe’s efforts to curb reliance on Russian natural gas imports, partly by utilizing more LNG, are expected to keep demand for the super-chilled fuel strong.
IEA also anticipates that Europe will continue to pay top dollar and remain the premium market for LNG as it has been for most of the year. The agency expects annual LNG imports on the continent to increase by a quarter, or 25 Bcm, this year to reach the highest level on record.
The agency noted that global LNG trade grew by 7% year/year in 1Q2022. Europe’s net imports rose by 70%, or 18 Bcm, during the period “as the continent compensated for the drop in Russian pipeline gas supplies mainly by increasing its LNG imports.”
IEA also said in its quarterly report that the United States continues to drive LNG production, accounting for 65% of the world’s net increase in output this year.
U.S. LNG exports are expected to grow by 19% in 2022, IEA said, citing the start of another liquefaction train at Cheniere Energy’s Inc.’s Sabine Pass Terminal and Venture Global LNG Inc.’s Calcasieu Pass terminal in Louisiana. Higher utilization rates at existing facilities are also expected to boost U.S. exports.
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