- Global demand for natural gas will likely start to dampen as Russia holds Europe to ransom by constantly threatening supply of the key heating fuel.
- Europe swapping to alternative sources of natural gas as well as relying on alternative fuels, including coal, while other countries reduce consumption due to diminished economic activity.
Global gas demand is expected to falter over the next three years amid rising crude prices and fears of future Russian supply cuts, according to the International the consumption of fossil fuels.
Gas usage is expected fall by 0.5% this year as economic activities in Asia slow coupled with a sharp downturn in European gas demand, according to an International Energy Agency (IEA) quarterly market report.
The IEA report notes that soaring prices alongside supply disruptions are “damaging the reputation of natural gas as a reliable and affordable energy source” and dampening demand.
According to the IEA, future growth for natural gas consumption is projected to be low as the “result of weaker economic activity and less switching from coal or oil to gas.”
Natural gas prices have soared by 700%, owing to Europe’s move to import liquefied natural gas from other suppliers, creating what the IEA notes has become an “exceptionally tight global market.”
But investors betting on sustained high prices for natural gas may be in for volatility, as the IEA report notes,
“The current forecast is subject to unusually large uncertainty, due to Russia’s unpredictable nature.”
As has been seen in several other key global commodity prices that have come off their most recent highs, it’s entirely possible for natural gas prices to slip as well, especially given that Europe is already working with other sources for fuel to heat itself over the coming winter.
Natural gas prices should nevertheless hold up in the medium term, as American sources for liquefying natural gas take time to come online.
