Following the gas supply shock of 2022, natural gas markets moved towards a gradual rebalancing in 2023 and remained relatively calm over the 2023/24 Northern Hemisphere winter. Unseasonably mild winter weather conditions, together with improving supply fundamantals kept natural gas markets stable. Asian and European spot gas prices fell to pre-crisis levels in Q1 2024 and in the United States Henry Hub prices plummeted to multi-decade lows. While the 2023/24 winter was milder on average, it was accompanied by several cold spells and gas demand spikes, which highlighted the importance of gas supply flexibility for energy security. This forecast expects natural gas demand to increase by 2.3% in 2024, primarily driven by fast-growing Asian markets.

Natural gas consumption increased by an estimated 2%, or almost 40 billion cubic meters, year-on-year (y-o-y) during the 2023/24 winter in the markets covered in the current Quarterly Gas Report. Demand growth was largely supported by higher gas use in the power and industrial sectors, while an unseasonably mild winter depressed space heating requirements in the key markets of the Northern Hemisphere. In the United States, residential and commercial gas demand dropped by almost 8% y-o-y, while in Europe it declined by an estimated 2% compared to the already very low levels of the 2022/23 winter.

Despite being an unusually mild winter on average, the 2023/24 heating season witnessed several cold spells, which resulted in record-breaking demand spikes across key markets in the Northern Hemisphere. In the United States, Winter Storm Heather drove natural gas use to an all-time high of almost 4 bcm a day on 16 January 2024 – about 30% above the daily demand average over the December-February period. In Europe, daily gas demand surged by almost 40% in only six days to an estimated 2.5 bcm a day in early January. Colder weather coincided with lower wind power output, increasing demand for both space heating requirements and gas-to-power demand. In Russia, a two-week cold spell in January led to several demand spikes, with gas demand surging to 1.78 bcm on 12 January 2024, its highest level on record. China faced several cold snaps over the 2023/24 winter season, with gas demand rising to an all-time high of 1.42 bcm a day in mid-December 2023. The cold spell drove up transmission pipeline utilisation rates to above 90% of capacity for the first time.

These events highlight the critical importance of gas supply flexibility for energy security, including in markets which are increasingly reliant on weather-sensitive renewable power generation, while using gas-fired power plants as a back-up option.

Unseasonably mild weather coincided with improving supply fundamentals over the 2023/24 winter season. Higher LNG production, up by 3% y-o-y, together with stronger piped gas deliveries to Europe and China further eased market fundamentals. This in turn provided downward pressure on Asian and European spot prices, which dropped below pre-crisis levels in Q1 2024. In the United States, the continued production growth combined with weak demand depressed natural gas prices to their lowest March average in more than three decades. 

Softer prices supported higher natural gas consumption in the industrial sectors. First estimates suggest that the combined industrial gas demand in China, Europe, India and the United States, which accounts for more than half of global industrial gas use, increased by close to 8% y-o-y. Industrial gas demand in Europe is showing signs of recovery with preliminary data indicating an increase of around 15% y-o-y through the 2023/24 winter, albeit remaining 10% below its 2020/21 levels.

Storage sites closed the 2023/24 heating season well-above their five-year average both in Europe and the United States. In the European Union (EU), storage sites were 58% full at the end of March, with inventories standing 45% above their five-year average.  Storage injections 35% below their five-year average would suffice to reach the EU’s 90% fill level target by the start of the 2024/25 winter. Lower injection demand over the summer 2024 could contribute to a further easing of market fundamentals.

Global gas demand is forecast to grow by 2.3% in 2024, revised down from 2.5% following a mild Q1. Demand growth is expected to be concentrated in fast-growing Asian markets. Industry emerges as the primary driver of growth, followed by residential and commercial sectors. Gas-to-power demand is forecast to increase only marginally, as higher gas burn in the Asia-Pacific region, North America and the Middle East is expected to be partly offset by the continued reductions in Europe. Lower hydro availability in China, India and Central and South America, could increase the call on gas-fired power plants.

Demand growth in key markets in Asia and Europe will be capped by the limited increase in global LNG supply, which is expected to grow by a mere 3%. However, this forecast comes with an unusually wide range of uncertainty. Potential start-up delays at new liquefaction plants, a tense geopolitical context, worsening feedgas issues at legacy projects and shipping constraints all represent downward risks to the current outlook.