London — Global gas demand is expected to increase by 2.8% -- or around 110 Bcm -- this year, just above the extent of the decline witnessed last year and signaling a return to 2019 consumption levels, the International Energy Agency said Jan. 26.
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In its first ever quarterly gas report, the IEA warned, however, that the rate of demand growth remained uncertain due to ongoing concerns over the coronavirus pandemic.
According to the IEA, gas demand in 2020 fell by 2.5%, or by an estimated 100 Bcm -- the largest ever recorded drop in gas consumption.
Demand this year is seen at 4.021 Tcm, up from 3.91 Tcm in 2020.
"Global gas demand is expected to recover in 2021 from an unprecedented drop in 2020," the IEA said.
"Yet the prospect of a prolonged economic impact related to the COVID-19 pandemic heightens uncertainty about the pace and trajectory of growth," it said.
Its forecast of 2.8% demand growth in 2021 also comes with two main caveats, it said.
The first is that all regions are not equal when it comes to gas market recovery.
"Mature markets bore the brunt of demand drop in 2020, while emerging markets will be the main drivers of demand growth in 2021," the agency said.
"Fast-growing markets in Africa, Asia, Central and South America and the Middle East are projected to account for about 70% of global demand growth in 2021. Mature markets are likely to see a more gradual recovery though some may remain below their 2019 demand levels."
The second caveat is that the "sectoral" pillars of growth are all subject to major uncertainties.
"Gas burn in power generation is expected to be hampered by slow electricity demand growth and increasing inter-fuel competition as gas prices recover from their 2020 lows," the agency said.
"Gas consumption in the industry is strongly dependent on economic recovery, especially for Asia's export-driven industries. Residential demand received support from cold temperatures so far, but would be negatively impacted in case of a return to milder weather conditions."
Gas demand in Europe is projected to increase by 2% in 2021, though not to reach pre-pandemic levels, the agency said.
A return to average heating requirements through the winter season and a gradual recovery of industrial and commercial activity drive the expected uptick in demand, it said.
While demand growth remains uncertain, the IEA said the global gas market continued to gain in depth and liquidity in 2020.
"This reflects expanding volumes of LNG traded on the spot market and a substantial rise in volumes traded on regional gas hubs," it said.
LNG volumes traded on spot and short-term basis continued to rise in 2020, with preliminary data suggesting an increase close to 8% to account for 37% of global LNG trade -- its highest share on record.
"Short-term volumes were driven up by higher net selling positions of portfolio players and uncontracted commission cargoes," the IEA said.
In contrast, the share of volumes traded under long-term contracts has been declining and was further depressed due to cargo cancellations through the third quarter, it said.
The US continued to be the largest source of flexible LNG, with a 20% share of spot and short-term volumes, which account for over half of incremental supply of spot and short-term LNG.
China and India remained the world's largest buyers of short-term and spot LNG, with respective market shares of 20% and 11%, the agency said.
"Buyers in China were particularly keen to benefit from the low spot prices through 2020 and increased purchases more than 50% year-on-year under short-term contracts and spot LNG, which offset more expensive sources of supply, including piped imports from Central Asia," it said.
China alone accounted for 40% of gross growth in spot and short-term LNG trading.
In Europe, Turkey increased purchases of short-term and spot LNG more than 50%, largely at the expense of piped imports from Iran and Russia, especially during the first half of 2020.
The IEA also said traded volumes on all major regional gas hubs increased.
"This highlights the increased appetite of market players to hedge positions along the forward curve," it said.