The expected small contraction in global gas demand compares with the IEA’s earlier forecast of 1 % growth in the previous quarterly update published in January.
The downward revision to the forecast amounts to 50 billion m3, the equivalent of about half of last year’s US LNG exports. Global natural gas consumption grew by 4.5 % in 2021.
Russia’s invasion has added further pressure and uncertainty to an already tight gas market, especially in Europe.
While there are no legal restrictions on importing Russian gas to the EU at this point, the military conflict has pushed EU governments to seek to reduce their dependence on Russian fossil fuel imports as quickly as possible.
Spot gas prices have soared to record highs as Europe’s push for a more diversified gas supply has intensified demand for LNG cargoes, with some being diverted away from Asia.
Average spot LNG prices in Asia during the 2021-22 heating season were more than 4 times their 5-year average.
In Europe, spot LNG prices were 5 times their 5-year average, in spite of a mild winter.
The prices were also boosted by Russia’s moves, even before its invasion of Ukraine, to reduce short-term gas sales to Europe, which had left European storage levels 17 % below their 5-year average at the start of the European heating season.
Keisuke Sadamori, the IEA Director for Energy Markets & Security, said:
- While stiffer competition for LNG supplies is inevitable as Europe reduces its reliance on Russian gas, the best and most lasting solution to today’s energy challenges would be to accelerate energy efficiency improvements across our economies and accelerate the transition away from fossil fuels towards low-carbon sources of energy, including domestically produced low-carbon gases
The flows of gas transiting through Ukraine have continued so far since the invasion, despite Ukraine itself experiencing supply disruptions and damage to its gas infrastructure.
According to the IEA, the gas consumption this year is expected to fall by close to 6 % in Europe.
In Asia, it is expected to grow by 3 % in 2022, a marked slowdown from growth of 7 % in 2021.
Regions such as the Americas, Africa, and the Middle East are expected to be affected less directly by gas market volatility, as they principally rely on domestic gas production.
It is worth reminding that the IEA and its members earlier in April agreed to their 2nd release of oil from emergency reserves in response to the market turmoil caused by Ukraine invasion.
This followed an announcement by the U.S. President Biden, about the largest release from the strategic petroleum reserves in American history of 1 million barrels a day for 6 months as part of a strategy to lower gas prices at the pump.
While the agency did not at 1st reveal the volume of the release, it later said the commitments submitted by members had reached 120 million barrels to be released over a 6 month period.
As a result, over the next 6 months, around 240 million barrels of emergency oil stocks, the equivalent of well over 1 million barrels per day, will be made available to the global market.
