A key factor for possible uncertainty before the arrival of the winter period in the Northern Hemisphere is the transit of Russian gas through Ukraine, for which contracts expire at the end of the year. This could mean a shutdown of pipelines from Russia to Europe that transit through Ukraine, which would require an increase in LNG imports to Europe in 2025 and could lead to a tighter global gas balance. This is what the International Energy Agency (IEA) writes in the conclusions of its latest report on the state of the gas markets in the last, fourth quarter of the year.
To address some of these challenges, the IEA recommends that flexibility mechanisms along the gas and LNG value chains be enhanced through higher liquidity in the global LNG market, integration of the Ukrainian gas storage system into the world gas market, as well as considering potential frameworks for voluntary gas reserve mechanisms.
Russian gas transited through Ukraine accounted for less than 4 percent of total gas demand in the European Union in 2023, but met about 65 percent of total gas demand in Austria, Hungary and Slovakia, it found more the report.
Global demand for natural gas is increasing at a higher rate in 2024 than in the previous two years, when it was hit hard by the global energy crisis. New gas supplies entering the market this year remain limited due to relatively slow growth in liquefied natural gas (LNG) production, while geopolitical tensions continue to fuel price volatility, the IEA also said.
According to the organization's estimates, global gas demand is expected to grow by more than 2.5 percent in 2024, with similar growth expected in 2025.
Emerging markets in Asia will account for most of the increase, while recovering industrial gas demand in Europe will also contribute, even if it remains well below pre-energy crisis levels.
"The growth we are seeing in global gas demand this year and next year reflects the gradual recovery from the global energy crisis, which has hit the markets hard," said IEA Director of Energy Markets and Security Keisuke Sadamori. "However, the balance between supply and demand trends is fragile, with clear risks of future volatility," he adds.
According to him, "producers and consumers must work closely together to cope with these uncertain times, while taking into account the need to advance on the path to a clean energy transition to ensure a secure and sustainable future." ;
The report finds that markets remain sensitive to unexpected supply and demand shocks.
The role of LNG in global gas markets has grown since the beginning of the global energy crisis. It will likely play a decisive role in maintaining the balance between supply and demand on a global scale, IEA experts also believe.
Restrictions on shipping through the Panama Canal (due to severe drought conditions - ed.) and the Red Sea (due to attacks by the Yemeni Houthi rebels - ed.) continue to affect shipping, but so far have not led to drop in liquefied gas supplies.
However, these restrictions highlight the potential vulnerabilities of LNG trading in an increasingly interconnected global gas market, the IEA has warned.
The situation could change in 2025, when LNG supply growth is expected to accelerate to nearly 6 percent as several major projects start production, mostly in the second half of the year.
North America will account for the majority of new LNG production capacity, while new market volumes are also expected from Africa and Asia.