Global natural gas markets are expected to remain tight in 2023, with demand remaining broadly flat as uncertainty surrounds China's LNG demand and with the possibility of further gas supply cuts by Russia, according to a new report released on Tuesday by the International Energy Agency (IEA).
Despite an estimated drop in gas consumption of 1.6% in 2022, natural gas markets worldwide continue to tighten.
Natural gas demand in Europe contracted by 13% last year, its steepest drop in recorded history, led by unprecedented price increases, the IEA said.
Emergency policies instigated due to the energy crisis and lower supplies, diminished industrial production and lower consumer demand, along with milder winter weather conditions, drove the drop in gas demand.
Asia's natural gas demand fell by 2% as a result of high LNG prices.
"China's gas consumption decreased by 1% in 2022 as a result of lower growth in economic and especially industrial activity, COVID-related restrictions and high prices," the IEA said in the report.
Gas consumption in North America last year saw a growth of 4.4%. The increase in gas consumption in US power generation, as well as growth in Canadian consumption by power generators and industrial consumers, drove up regional demand.
LNG became a more dynamic supply source as piped gas supplies tightened due to lower Russian supplies.
The value of global LNG trade hit an all-time high, doubling to $450 billion despite the 6% growth in traded volumes compared to 2021.
Europe was the primary driver behind the rise in LNG demand, with a 63% growth in LNG cargoes to Europe last year.
Japan remained the world's largest LNG importer, despite a drop of 3% in LNG inflows in 2022.
China "great unknown in 2023"
The IEA warns that although natural gas prices have fallen in recent months after skyrocketing last year, the falling price trend could change this year as demand for LNG picks up in Asia, particularly in China.
"Last year was extraordinary for global gas markets. Prices are returning to manageable levels, particularly in Europe, where a mild winter and demand destruction have helped to cool markets," said Keisuke Sadamori, the IEA's director of energy markets and security, as quoted in the report.
"China is the great unknown in 2023. If global LNG demand returns to pre-crisis levels, that will only intensify competition on global markets and inevitably push prices up again."
According to the report, China's LNG demand could rise by 10% this year with the lifting of COVID-19 restrictions.
The IEA, on the other hand, stated that current forecasts are highly uncertain, and that China's renewed demand growth could be as high as 35% if prices continue to fall and general economic activity recovers swiftly.
"This would spark fierce competition in international markets and could see prices return to the unsustainable levels seen last summer, representing a concern for European buyers in particular," the report said.
Source: Anadolu Agency