IEA: Gas Market Under Less Pressure Due to Lower Prices and Filled Storage

A sharp decline in natural gas prices and solid levels of gas storage will reduce pressure on gas prices in global markets this year, the International Energy Agency (IEA) announced on Thursday.

Prices of liquefied natural gas in European and Asian spot markets fell at the end of the first quarter of 2023 below the levels they were at in the summer of 2021, although they remain “significantly above” the historical average, the agency stated in its Gas Market Report.

According to contracts for future gas deliveries on the Dutch exchange Dutch Title Transfer Facility, the benchmark in Europe, a megawatt hour of gas is currently being sold for under 40 euros, after reaching a record of approximately 343 euros last August.

Storage facilities, on the other hand, ended this winter with stock levels above the five-year average, as the sharp drop in gas prices reduced the need to withdraw this energy source from storage, the agency reported.

In Europe, gas consumption in the heating season 2022/23 fell by a record 16 percent or 55 billion cubic meters. “This is expected to reduce the demand for gas injection during the summer of 2023 and potentially ease market fundamentals,” it adds.

The report states that the EU now needs only half of the quantities of gas that were injected into storage last summer to reach the targeted storage filling level of 90 percent by the beginning of the heating season 2023/24.

Meanwhile, LNG now accounts for two-thirds of European gas imports, and LNG satisfied about one-third of demand during the heating season 2022/23.

European LNG imports increased by 25 percent or 20 billion cubic meters during the last heating season, with the U.S. supplying more than 45 percent of the increased supply.

– Improved prospects for the gas market in 2023 do not guarantee that instability will not arise in the future and should not distract from measures to mitigate potential risks – warned the IEA.

Supply in 2023 is expected to be limited due to uncertainty arising from weather conditions, reduced availability of liquefied natural gas, and further reductions in exports from Russia, the agency stated.

The agency expects that global LNG supply will increase by only 4 percent this year, which is not sufficient to offset the expected decline in Russian gas supply.

It is estimated that the U.S., which has become the largest European supplier of liquefied gas, will account for more than half of the world’s increase in supply in 2023, the agency reported.

Freeport, the second-largest U.S. LNG export facility, has resumed operations after being closed due to a fire in June 2022. This facility can process up to 2.1 billion cubic feet of natural gas per day and export 15 million tons of LNG annually.

On the other hand, the IEA expects that global demand for natural gas this year will remain “stable,” as consumption decreases in Europe and North America. However, in Asia, demand for gas is expected to increase by about 3 percent, driven by the needs of China and India.