Global Gas Market in 2024 Amidst Geopolitical Flux

In retrospect, the tepid growth of just 0.5% in global gas demand during 2023 reflected a tale of divergent fortunes, with buoyancy in China, North America, and gas-rich regions in Africa and the Middle East offsetting declines elsewhere, as outlined in the latest Gas Market Report by the IEA.

Forecasts for the current year suggest a notable uptick in global gas demand, fueled by colder winter temperatures and favorable pricing dynamics. Emerging economies are poised to spearhead the surge in consumption, albeit against a backdrop of geopolitical risks and supply-side constraints that could precipitate renewed price volatility, cautions the IEA.

Rejuvenated by the gradual relaxation of pandemic restrictions and resurgent economic activity, China reclaims its mantle as the world’s leading liquefied natural gas (LNG) importer, even as natural gas demand surges by 7%. In stark contrast, Europe witnesses a precipitous 7% decline in natural gas consumption, plunging to its lowest ebb since 1995. This downturn, exacerbated by the ascendant renewables sector and expanded nuclear capacity, exerts downward pressure on natural gas demand in both Europe and mature Asian markets, culminating in price adjustments, observes the agency.

Impelled by the anticipation of colder weather in 2024 vis-à-vis the mild temperatures of the preceding year, global gas demand is forecast to burgeon by 2.5%, or 100 billion cubic meters (bcm). The resurgence in demand, facilitated by price corrections, underpins a nascent phase for the global gas market, contends Keisuke Sadamori, IEA Director of Energy Markets and Security. However, he cautions that the pace of demand growth hinges critically on supply dynamics, given prevailing constraints and the delayed advent of significant LNG capacity until post-2024.

The sharp decline in natural gas prices from the zenith of 2022 augurs well for demand recovery, albeit with prices hovering above historical averages. The industrial sector, attuned to price sensitivities, is primed for a resurgence in demand, while modest upticks in gas utilization in power generation are anticipated, with varied regional dynamics shaping the outlook.

On the supply front, concerns linger over tightness, with the global LNG production shortfall failing to meet expectations in 2023. Despite the United States emerging as the preeminent LNG exporter, supplementing 80% of additional supply, constraints persist, notably in Russian piped gas deliveries to Europe.

Looking ahead, limited increments in global LNG output are anticipated, constrained by delays in new liquefaction ventures and feedgas availability woes, potentially deferring supply growth to 2025. Against this backdrop, burgeoning demand and tight supply dynamics portend pronounced price fluctuations throughout the year.

Amidst this intricate tapestry, geopolitical uncertainties loom large as the foremost risk factor for global gas markets in 2024. A spectrum of geopolitical flashpoints, including Russia’s Ukraine incursion and heightened Middle East tensions, underscores the fragility of the current landscape, evoking concerns over supply disruptions and attendant price spikes, underscores the IEA.

In response to mounting uncertainties, key import markets pivot towards policy measures geared towards affordability and supply security, with initiatives such as the European Union’s Joint Gas Purchasing mechanism and Japan’s Strategic Buffer LNG program indicative of a proactive stance. Meanwhile, China’s deliberations on its Natural Gas Utilisation Policy underscore a concerted effort towards fostering orderly growth in natural gas demand, epitomizing a landscape characterized by adaptability and resilience in the face of geopolitical flux.