Natural Gas Markets to Achieve Strong Growth in 2024: IEA

By Editor


In 2023, the natural gas markets experienced a gradual rebalancing driven by a combination of timely policy interventions, market forces, and favorable weather conditions, the International Energy Agency (IEA) said in its report

Although gas prices witnessed a significant decline from their peak in 2022, they continued to hover well above historical averages in Asia and Europe. Throughout key markets, hub liquidity saw improvement, reflecting heightened trading activities. However, despite this rebalancing, the supply side of the market remained tight, contributing to sustained price volatility.

The expectation for the natural gas markets in 2024 is a return to growth. However, this expansion will be constrained in import markets due to the limited increase in global liquefied natural gas (LNG) supply. The decline in prices observed across major markets in 2023, particularly in Asian spot LNG and European hub prices, was substantial. Despite more than halving since 2022, these prices remain more than double the averages recorded between 2016-20.

A notable development in 2023 was the increase in LNG production, with the United States emerging as the world’s largest LNG exporter, accounting for 80 percent of the additional supply. Nevertheless, this growth fell short of expectations due to project delays and feedgas supply issues. The decline in Russian piped gas deliveries to Europe further exacerbated the tightness in gas supplies.

The softening of market conditions in 2023 primarily stemmed from the demand side. The rapid expansion of renewable energy sources and improved nuclear availability in Europe and mature Asian markets led to a decrease in natural gas demand, contributing to lower prices. Mild winter weather conditions, coupled with gas-saving measures, also played a role in reducing gas usage in residential and commercial sectors globally.

Although global gas demand grew by an estimated 0.5 percent in 2023, it was insufficient to offset the 1.5 percent drop observed in 2022. Notably, China, North America, and gas-rich markets in Africa and the Middle East supported demand growth, while Europe experienced a 7 percent decline in natural gas consumption, reaching its lowest level since 1995.

Policy Responses Address Security of Supply, Affordability, and Emissions Reduction

Concerns over the security of gas supply, affordability, and efforts to reduce emissions drove significant policy developments in 2022 and 2023. The global energy crisis triggered by Russia’s invasion of Ukraine brought security of supply to the forefront of energy policymaking. Key import markets enacted policy measures and regulations to reinforce gas supply security. Notable initiatives included the European Union’s Joint Gas Purchasing mechanism, Singapore’s centralization of natural gas procurement, and Japan’s launch of the Strategic Buffer LNG.

The International Energy Agency (IEA) conducted a survey on the initiatives, policies, and regulations enacted by major natural gas producers and consumers. The survey revealed a commitment to reduce emissions along gas supply chains, emphasizing the need for further efforts to harmonize measurement, monitoring, reporting, and verification mechanisms.

Low-Emissions Gases Gain Momentum

In 2023, low-emissions gases continued to benefit from various policy initiatives. The European Union introduced the Hydrogen Bank, and a political agreement was reached on the hydrogen and decarbonized gas markets package. The United States published its National Clean Hydrogen Strategy and Roadmap, allocating USD 7 billion for seven Regional Clean Hydrogen Hubs. Japan and India also outlined comprehensive strategies to promote hydrogen adoption and green hydrogen production.

Outlook for 2024: Gas Markets Set to Grow with Some Caution

The outlook for 2024 anticipates global gas demand to grow by 2.5 percent, concentrated in fast-growing markets in the Asia Pacific and gas-rich countries in Africa and the Middle East. Industry, residential, and commercial sectors are expected to contribute to this growth, assuming a return to average winter weather conditions after the mild seasonal weather experienced in 2023. Gas-to-power demand is projected to increase marginally, with variations across regions.

However, the growth in key markets, especially in Asia and Europe, is expected to be capped by the limited increase in global LNG supply, forecasted to grow by a modest 3.5 percent. The forecast comes with a wide range of uncertainty, including potential start-up delays at new liquefaction plants, geopolitical tensions, feedgas issues at legacy projects, and risks related to shipping. These uncertainties may fuel price volatility throughout 2024.

Latest News