IEA Sees Gas Rebound in 2021
On the heels of a record decline in global natural gas demand in 2020, the Paris-based International Energy Agency (IEA) forecast something of a rebound in demand this year in its Gas Market Report, Q1-2021, released January 29.
Given the volatility of global gas markets in recent years, the IEA has moved to generate quarterly gas market reports, which will form the basis of its next Gas 2021 annual report. The quarterly reports will offer detailed analysis of recent developments in global gas markets and update the agency’s near-term outlooks.
“Exceptionally mild weather” early in 2020 was followed by the “onslaught of the Covid-19 pandemic” later in Q1, combining to strip about 100bn m3 from global gas consumption for the year, a drop of about 2.5%, the report says. Much of the impact was concentrated in the first half, which saw a 4% year-on-year decline in global demand.
Progressive recovery was seen in Q3 as lockdown measures eased, seasonal electricity demand growth pushed gas-for-power consumption higher and global gas prices began to strengthen. The year closed with colder temperatures and higher prices, setting the stage for the IEA’s relatively bullish – but tempered – outlook for 2021.
“This forecast expects global natural gas demand to grow 2.8% in 2021 (about 110bn m3), slightly above the 2020 decline, thus enabling a recovery to the 2019 level,” the report says.
The modest increase in demand, the IEA cautions, is “far cry” from the 7.5% year-on-year growth seen in 2010 in the wake of the 2009 financial crisis, and comes with a pair of key caveats: all regions are not equal when it comes to demand recovery, and the sectoral pillars of growth remain subject to major uncertainties.
“Mature markets bore the brunt of demand drop in 2020, while emerging markets will be the main drivers of demand growth in 2021,” the report notes. “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.”
And gas demand in the power generation sector, which bore the brunt of the demand destruction in 2020, will be slower to recover in the face of increasing inter-fuel competition and continued gas price recovery.
“Gas consumption in the industry is strongly dependent on economic recovery, especially for Asia’s export-driven industries,” the report notes. “Residential demand received support from cold temperatures so far, but would be negatively impacted in case of a return to milder weather conditions.”