the continuous reduction of natural gas flows from Russia to Europe has pushed international prices to new highs, disrupted trade flows and led to severe fuel shortages in some emerging and developing economies, with the market tightening expected to continue through 2023. The latest report predicts gas market quarterly International Energy Agency (OUCH).
Global natural gas markets have been tightening since 2021, with global gas consumption expected to decline by 0.8% in 2022 due to a record contraction of 10% in Europe and stagnant demand in the Asia-Pacific region. It is predicted that world gas consumption will increase by only 0.4% at a nearer price, pero las perspectives están subjectas a alto nivel de incertidumbre, particularly in términos de las future actions de Rusia y los economic impacts de los altos precios sostenidos de Energy.
Russia has largely cut off gas supplies to Europe in retaliation for sanctions imposed on it following its invasion of Ukraine. This has heightened market tensions and uncertainty as we approach next winter, not only for Europe, but also for all markets that rely on the same liquefied natural gas (LNG) supply pool.
Keisuke Sadamori, Director of Energy Markets and Security at the IEApoints out: “The Russian invasion of Ukraine and the severe reductions in natural gas supply to Europe are causing significant damage to consumers, businesses and entire economies, not only in Europe, but also in emerging economies. and in development. The outlook for gas markets remains bleak, in part due to Russia’s reckless and unpredictable behavior, which has undermined its reputation as a reliable supplier. But all signs point to markets remaining very tight through 2023.”
The current gas crisis also casts long-term uncertainty on the outlook for natural gas, particularly in developing markets, where its use is expected to increase at least in the medium term as it displaces other higher-emitting fossil fuels.
Natural gas price in Europe and LNG spot price in Asia hit records in the third quarter of 2022. This reduced the demand for gas and encouraged a switch to other fuels such as coal and oil for power generation. In some emerging and developing economies, price spikes have caused power shortages and blackouts. Gas consumption in Europe fell by more than 10% in the first eight months of this year compared to the same period in 2021, driven by a 15% drop in the industrial sector, as factories cut production.
Natural gas demand in Asia and the United States
The natural gas demand in China and Japan remained virtually unchanged over the same period, while it contracted in India and Korea. Chinese gas demand is expected to grow less than 2% this year, its weakest annual growth rate since the early 1990s. Meanwhile, U.S. natural gas prices have hit their highest levels. summer since 2008, however, North America was one of the few regions in the world where demand grew, supported by demand for power generation.
The situation in Europe
Europe has compensated for the sharp declines in Russian gas supplies thanks to LNG imports, as well as Alternative pipeline supplies from Norway and other places. Growing LNG demand in Europe, up 65% in the first eight months of 2022 year-on-year, has driven supply away from traditional buyers in the Asia-Pacific region, where demand has fallen by 7% over the same period due to prices, mild weather and ongoing Covid lockdowns in China.
The OUCH forecasts that European LNG imports will increase by more than 60 billion cubic meters (bcm) this year, more than double the world’s LNG export capacity, which keeps international LNG trade under severe pressure in the short and medium term.
This implies that LNG imports from Asia will remain lower than last year for the rest of 2022. However, LNG imports from China could increase next year as part of a series new contracts concluded from the beginning of 2021, while a colder than average winter also lead to additional demand from Northeast Asia, further increasing market rigidity.
The report concludes that gas-saving measures will be crucial in minimizing storage drawdowns and maintaining inventories at adequate levels until the end of the heating season.
Character font: Javier Lopez de Benito/EnergyNews
Reference article: https://www.energynews.es/report-of-the-market-of-natural-gas-of-the-iea/