Global natural gas demand accelerated during the first half of the year at a rate well above the historical average, according to the International Energy Agency’s (IEA) latest quarterly report.
IEA said initial estimates indicated that global gas demand increased by 3% year/year from January to June, higher than the historical rate of 2% over the same period between 2010 and 2020. The trend also was a reversal from tepid demand growth in recent years after the Covid-19 pandemic and Russia’s invasion of Ukraine prompted a global rebalancing of energy flows.
Demand growth was largely supported by Asia, with China and India both increasing consumption by 10% year/year. IEA added that higher gas use in industry contributed to almost 65% of global demand growth during the first half of 2024.
While the growth rate is fragile, it could be an early indicator of the market’s ability to absorb a major LNG supply wave expected between 2026 and 2028, according to IEA. The projected increase is poised to boost the world’s liquefaction capacity well north of 500 million metric tons/year (mmty), or about 100 mmty more than the market currently consumes.
However, IEA cautioned that 70% of this year’s demand growth was concentrated in the first quarter. Liquefied natural gas supply declined year/year in the second quarter, which pushed prices higher across key import markets.
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LNG supply jumped by 2% year/year during the first half of 2024. The gains came in the first quarter, but feed gas issues and unplanned outages at plants across the globe pushed output 0.5% lower in the second quarter, the first decline since 2020 when hundreds of cargoes were canceled amid the pandemic.
The lack of supply kept the market tight, while geopolitical instability has continued to create additional volatility.
As a result, natural gas demand growth is expected to moderate in the second half of the year. Overall, IEA forecast demand to increase by 2.5% in 2024, driven primarily by “fast-growing” Asian markets.
In the short term, the agency said geopolitical instability represents the greatest risk to the market. LNG trade has been halted across the Red Sea following attacks on commercial shipping, and the war in Ukraine continues to threaten energy infrastructure.
“In this context, security of supply for natural gas remains a key aspect of energy policymaking and the risks related to our outlook highlight the need to strengthen international cooperation, including in assessing and implementing flexibility options along gas and LNG value chains,” IEA said.
