Global gas markets returned to growth in the first half of 2024, but outlook remains fragile
Following the natural gas supply shock of 2022 and a gradual rebalancing in 2023, gas markets moved to more pronounced growth in the first half of 2024. Initial estimates indicate that global gas demand increased by 3% year-on-year (y-o-y) during this period, well above the historical 2% average growth rate between 2010 and 2020. Despite this strong growth, the recovery remains fragile. Global LNG production underperformed in the second quarter, while geopolitical tensions are fuelling price volatility. During the first quarter of 2024, gas prices dropped to levels last seen before the global energy crisis, however prices have increased across all key markets in recent months, reflecting tighter supply-demand fundamentals. Gas demand growth is expected to moderate in the second half of 2024. For the full year of 2024, global gas demand is forecast to increase by 2.5%, primarily driven by fast-growing Asian markets.
Asia was the driving force behind global gas demand growth in the first half of 2024
Preliminary data suggest that global natural gas demand increased by 3% in the first half of 2024. However, 70% of this demand growth was concentrated in the first quarter. LNG supply declined year-on-year in the second quarter, creating upward pressure on gas prices across key import markets, which in turn weighed on demand growth.
Asia accounted for around 60% of the increase in global gas demand in the first half of 2024, with demand in both China and India increasing by just over 10% y-o-y. Higher gas use in industry contributed to almost 65% of global demand growth in the first half of 2024. This was primarily supported by the economic expansion of fast-growing Asian markets. Gas use in the power sector grew by a more moderate 2% y-o-y, as the strong gains in North America, fast-growing Asian markets and Eurasia were partially offset by lower gas-fired power generation in Europe. Gas demand in the residential and commercial sectors grew by 1% y-o-y amid unseasonably warm temperatures in the first quarter.
Global LNG supply decreased in the second quarter – its first contraction since the Covid lockdowns in 2020
Global LNG supply growth remained lacklustre in the first half of 2024, increasing by a mere 2%, or around 6 bcm, year-on-year. This growth was entirely concentrated in the first quarter as LNG production rose by a robust 4.5% (or 6.5 bcm). By contrast, LNG output fell by 0.5%, or 0.5 bcm, y-o-y in the second quarter of 2024. This represents the first y-o-y quarterly decline since 2020, when Covid-induced lockdowns drastically reduced LNG demand and led to widespread cargo cancellations. In the second quarter of 2024, the decline in LNG production was largely driven by a combination of feed gas supply issues and unexpected outages.
Year-on-year growth in LNG supply is expected to accelerate during the second half of 2024, with new liquefaction capacity coming online. The United States is set to provide the lion’s share of new export capacity this year as existing plants expand and new plants start operating. This includes the expansion of Freeport LNG, the ramp-up of Plaquemines LNG Phase 1 over the summer, and the expected start-up of Corpus Christi Stage 3 near the end of 2024. The Tortue FLNG plant off the coast of West Africa is due to come online in the fourth quarter.
Estimated year-on-year change in key piped natural gas trade and global LNG supply by quarter, 2023 – 2024
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Natural gas prices increased across all key markets in the second quarter
The contraction in LNG supply combined with strong Asian demand growth tightened the global gas balance in the second quarter. Moreover, uncertainties re-emerged around Russian piped gas supplies to Europe, which fuelled additional price volatility. Consequently, gas prices rose across key Asian and European markets, rising above their 2023 levels by June 2024. In the United States, Henry Hub prices recovered from their multi-decade lows, rising by almost 70% between March and June. Production cuts by upstream players, a strong increase in gas-fired power generation and higher gas exports all provided upward support to gas prices.
Evolution of key regional natural gas prices since 1 January 2024
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Natural gas demand growth is expected to slow in the second half of 2024
Global gas demand growth is expected to fall below 2% y-o-y in the second half of 2024. In part, the easing reflects the gradual recovery in demand, which was already underway in the second half of 2023. For the full year of 2024, global gas demand is forecast to grow by 2.5%, or just over 100 bcm. We expect the limited increase in global LNG supply to restrain growth in import markets. Industry emerges as the most important driving force behind global demand, as gas use in the power sector is forecast to increase only marginally. This is because growth in fast-growing Asian markets and in gas-rich countries in Africa, the Middle East and North America is expected to be partially offset by declines in Europe.
Low-emissions gas supply is expected to more than double by 2027
The deployment of low-emissions gases is expected to accelerate over the medium term. Our current forecast sees the supply of low-emissions gases more than doubling by 2027, translating into an increase of almost 16 bcm in absolute terms. This represents a significant upward revision compared with our medium-term outlook last year and reflects growing policy support for low-emissions gases. Europe and North America are set to drive this expansion, contributing over 70% of the overall growth. Nevertheless, further efforts are required to unleash the full potential of low-emissions gases and reach the ambitious targets set by governments. Besides Europe and North America, a number of emerging low-emissions gas producers are expected to scale up their output, including Brazil, China and India.
