IEA forecast global gas demand decline despite lower gas prices

The International Energy Association has released its medium-term report forecasting that global gas demand will continue to dip despite lower gas prices.

This report forecasts demand to reach 3.9 trillion cubic metres in 2021, increasing at an average annual rate of 1.5%, equivalent to an incremental 340 bcm between 2015 and 2021. Slower primary energy demand growth and the decline in the energy intensity of the world economy are lessening demand growth for all fossil fuels, it said.

The report stated that while global consumption will expand by 1.5 percent annually from 2015 through 2021, down from last year’s forecast of 2 percent growth from 2014 through 2020 and a 2.5 gain over the prior six years.

It says the slowdown will be driven by weaker use in the U.S. and Japan as the fuel struggles to compete against booming renewables and “very cheap” coal in power generation.

“Slower generation growth, rock-bottom coal prices and robust deployment of renewables constrain gas’s ability to grow faster in today’s low-price environment,” the IEA said.

World gas demand will be 3.9 trillion cubic meters (140 trillion cubic feet) in 2021, compared with 3.6 trillion cubic meters in 2015, the IEA said. Global supply will also rise 1.5 percent annually, slowing from the prior period as low prices and demand deter investments.

Global gas markets will remain oversupplied until 2018 and demand and supply won’t align until 2021 as liquefied natural gas capacity jumps 45 percent through 2021, 90 percent of which in the U.S. and Australia. Markets will struggle to absorb the increase amid the return of Japanese reactors, cheap coal and competitive Russian pipeline fuel in Europe. The IEA in February said an oil glut that damped prices will end in 2017.