With the northern hemisphere gradually entering winter and gas storage in good condition, this week, some short-term natural gas contracts in the United States and Europe were surprised to see “negative gas prices”. Has the great turbulence in the global natural gas market passed?
The International Energy Agency (IEA) recently released the Natural Gas Analysis and Outlook (2022-2025) report, which said that although the North American natural gas market is still active, global natural gas consumption is expected to decline by 0.5% this year due to the reduction of economic activities in Asia and the high price of natural gas demand in Europe.
On the other hand, IEA still warned in its quarterly natural gas market outlook that Europe will still face an “unprecedented” risk of natural gas shortage in the winter of 2022/2023, and suggested to save gas.
Against the backdrop of the global drop in demand, the decline in Europe is the most significant. The report shows that since this year, natural gas prices have fluctuated and supply has been unstable due to the conflict between Russia and Ukraine. The demand for natural gas in Europe in the first three quarters has decreased by 10% compared with the same period last year.
At the same time, the demand for natural gas in Asia and Central and South America also slowed down. However, the report believes that the factors of slowing demand in these regions are different from those in Europe, mainly because economic activities have not yet fully recovered.
North America is one of the few regions where the demand for natural gas has increased since this year – the demand of the United States and Canada has increased by 4% and 8% respectively.
According to the data given by European Commission President Von Delain in early October, the EU’s dependence on Russian natural gas has decreased from 41% at the beginning of the year to 7.5% at present. However, Europe has fulfilled its gas storage target ahead of schedule when it cannot expect Russian natural gas to survive the winter. According to the data of European Natural Gas Infrastructure (GIE), the reserves of UGS facilities in Europe have reached 93.61%. Earlier, EU countries committed to at least 80% of gas storage facilities in winter this year and 90% in all future winter periods.
As of the time of press release, the TTF benchmark Dutch natural gas futures price, known as the “wind vane” of European natural gas prices, reported 99.79 euros/MWh in November, more than 70% lower than the peak of 350 euros/MWh in August.
IEA believes that the growth of natural gas market is still slow and there is great uncertainty. The report predicts that the growth of global natural gas demand in 2024 is expected to shrink by 60% compared with its previous forecast; By 2025, the global natural gas demand will have an average annual growth of only 0.8%, which is 0.9 percentage points lower than the previous forecast of an average annual growth of 1.7%.