IEA sees gas demand growth impacting emissions targets

Quantum Commodity Intelligence – Natural gas demand is expected to grow strongly in the medium term after the record fall in 2020, impacting the global target for zero net emissions by 2050, the International Energy Agency (IEA) said on Monday.

"We forecast global demand to rebound by 3.6% in 2021. And unless major policy changes to curb global gas consumption are introduced, demand is set to keep growing in the coming years, albeit at a slower pace, to reach nearly 4,300 billion cubic meters by 2024, a 7% rise from pre-Covid levels," the IEA said in its Q3 2021 outlook.

However, from 2022-2024 demand growth is expected to average 1.7% per year, which means gas demand would be too high to keep to the IEA's roadmap towards meeting global net zero emissions by 2050.

More than 190 countries have signed the Paris agreement designed to limit global warming to 1.5 degrees Celsius, which requires a massive reduction in the use of oil, coal and gas.

"Natural gas demand is set to rebound strongly in 2021 and will keep rising further if governments do not implement strong policies to move the world onto a path towards net-zero emissions by mid-century," said the report.

In May the IEA published its pathway to achieving zero net emissions by 2050.

Trade and pricing

The IEA said Global LNG trade volumes in 2024 are expected to be 17% above the pre-Covid levels seen in 2019, driven by continued demand growth in Asia and in the absence of strong policy initiatives in major gas markets.

"At an annual average growth rate of 3.3% through 2024, this is much slower than the double-digit increases observed between 2016 and 2019," said the report.

Turning to prices, the US benchmark Henry Hub prices increased by over 70% y-o-y in Q2, to an average of USD 2.9/mmBtu – their highest Q2 average since 2017.

"This has been largely supported by the surge in LNG exports (up by 30% y-o-y), which increased overall system demand, whilst gas production remained close to last year's levels," said the IEA.

In Europe, cold spring temperatures during April and May, together with lower LNG inflows, supported a strong increase in TTF prices, rising by fivefold in Q2 y-o-y to an average of USD 8.7/mmBtu –its highest Q2 average since 2013.

In Asia, LNG spot prices more than quadrupled y-o-y in Q2 to reach an average of USD 9.8/mmBtu – their highest Q2 average since 2014.