The COVID-19 crisis and a mild winter in the northern hemisphere have delivered a historic shock to the global natural gas market, the International Energy Agency said in a new report
Global gas demand is expected to fall by four per cent or 150 billion cubic metres (bcm) – twice the size of the drop following the 2008 global financial crisis.
As of early June, all major gas markets worldwide are experiencing falls in demand or slumps in growth, according to the IEA’s latest annual market report Gas 2020. More mature markets across Europe, North America, and Asia are forecast to see the largest drops for the full year, accounting for 75 percent of total gas demand decline in 2020.
“Natural gas has so far experienced a less severe impact than oil and coal, but it is far from immune from the current crisis. The record decline this year represents a dramatic change of circumstances for an industry that had become used to strong increases in demand,” said Dr Fatih Birol, the IEA’s executive director.
Global oversupply is pushing major natural gas indices to record lows, while the oil and gas industry is cutting spending and postponing investment decisions to make up for the significant shortfall in revenue. The IEA report does not assume a rapid return to the pre-crisis trajectory, although a rebound is expected in 2021.
“Global gas demand is expected to gradually recover in the next two years, but this does not mean it will quickly go back to business as usual,” Dr Birol said. “The COVID-19 crisis will have a lasting impact on future market developments, dampening growth rates and increasing uncertainties.”
Also under pressure from the current oil price collapse and uncertainty surrounding short-and medium-term demand trends are the major drivers of future supply growth – US shale and large conventional projects in the Middle East and Russia.
LNG remains the principal driver of international gas trade. The wave of investment in LNG projects during 2018 and 2019 will bring additional export capacity in North America, Africa and Russia. Slower growth in global gas demand is likely to result in capacity outpacing LNG imports through 2025, limiting the risk of a tight LNG market for the time being.
According to the report, new production and infrastructure projects are likely to come online amid growth trends that are markedly below earlier expectations, reinforcing the prospect of overcapacity and low prices.
