The International Energy Agency (IEA) expects liquefied natural gas (LNG) demand to meet shortfalls in global natural gas supply chain as a result of the Covid-19 pandemic, Kallanish Energy reports.
According to the Global Gas Security Review 2020 report, published by the IEA on Monday, global natural gas demand is forecast to fall 3%, or 120 billion cubic metres (Bcm), this year primarily due to the pandemic.
The report found that at the same time, global LNG trade has increased, driven by continued capacity additions on the supply side, and buyer response to low spot LNG prices on the demand side.
Although there have been detrimental effects to LNG exporting nations during the first half of the year, without the flexibility of global LNG supply, the adjustment to the demand shock recorded this year would have been “less orderly” and could have resulted in a “damaging effect on the commercial and contractual structures.”
Global gas demand fell by an estimated 4% year-on-year in the first half of 2020 due to the combination of the pandemic and mild weather conditions in the northern hemisphere. Most of the declines in gas consumption took place in mature markets across Europe, North America and Asia — markets accounting for over 80% of the forecast drop in global natural gas demand for 2020.
The report forecasts that natural gas demand will be slow to rebound from the effects of Covid-19, with demand increasing by 3%, or approximately 130 Bcm, by 2021. The IEA believes this will be driven by growing markets in Asia, Africa and the Middle East, although there is a caveat of further uncertainty depending on the resurgence of Covid-19.
“Since the IEA started tracking flexibility in LNG markets in the first edition of the Global Gas Security Review five years ago, we have seen a notable improvement across a range of LNG market flexibility metrics,” commented Fatih Birol, IEA’s executive director. “This is improving security of supply and was critical in enabling the market to adjust to the historic demand shock witnessed in the first half of 2020.”
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