Gas Market Report, Q1-2023

Gas Market Highlights 2022

Record high gas prices and volatility: In 2022, global natural gas prices reached record highs, leading to significant market volatility and affecting liquidity at key hubs.

Churn rates: Churn rates continued to decline across all major natural gas markets, indicating stable trading conditions.

LNG Industry:

• Utilization: Global liquefaction capacity utilization dipped below average in the second half of 2022.
• FID Wave: A much-anticipated wave of new liquefaction capacity investments did not materialize in 2022.
• US Liquefaction: The United States supplied about two-thirds of Europe's incremental LNG imports, with other flexible suppliers increasing their deliveries.
• Floating Storage: Congestion led to record volumes of LNG being stored in floating facilities in Europe during Q4 2022.
• New Infrastructure: Interest in new LNG import infrastructure surged within the European Union since early 2022.
• Global Trade: The value of global LNG trade reached an all-time high in 2022, doubling to over USD 450 billion.
• Carrier Orders: Chinese shipyards accounted for more than a third of global LNG carrier orders in 2022.

Supply Security and Market Reforms:

• European Union: Adopted a Joint Gas Purchasing Mechanism in 2022 to enhance supply security.
• Demand Reduction: Governments in Europe and other importing markets took strong policy measures to increase energy resilience and reduce reliance on natural gas.

Gas Market Update and Short-Term Forecast

North America:

• Demand Recovery: North American natural gas demand fully recovered its 2020 losses, with an estimated growth of over 4% in 2022.
• US Consumption: US gas consumption increased by over 5% in 2022, driven by power generation and residential uses.
• Production: US natural gas production reached new records in 2022, primarily supported by oil-driven assets, with limited growth from pure gas-driven plays.

Central and South America:

• Consumption: Gas consumption fell slightly in Central and South America in 2022, despite a steep drop in Brazil. Further decline in the power generation sector is anticipated in 2023.
• Regional Variability: The drop in Brazil's gas consumption was partly offset by increases in other Central and South American markets.

Europe:

• Demand: European gas demand experienced its steepest drop in history in 2022, declining by over 70 bcm amid mild weather and demand reduction in industry.
• Russian Supplies: Russian piped gas supplies to Europe fell to their lowest level since the mid-1980s, partially offset by a record LNG inflow.
• LNG Imports: Europe drove global LNG import growth in 2022, with North America leading LNG export growth.

Asia:

• Demand Pressure: Asian gas demand faced pressure in 2022, with modest recovery expected in 2023.
• Market Dynamics: Widespread demand declines in Asia are likely to be followed by an uneven recovery in 2023.

Future Outlook:

• LNG Demand in China: China's demand for LNG in 2023 presents 40 bcm of demand uncertainty for the global LNG market.
• Spot Prices: Easing market fundamentals put downward pressure on spot prices, particularly in Q4 2022.
• Price Spread: The price spread between TTF and Asian spot LNG is expected to tighten in 2023.
• Storage: EU storage sites ended 2022 with inventory levels well above their five-year average.
• Low-Emission Gases: The gas supply shock of 2022 highlighted the importance of low-emission gases, with European countries setting more ambitious hydrogen targets.

Key Data Points

• LNG Trade Value: Global LNG trade doubled to over USD 450 billion in 2022.
• US Gas Production: US natural gas production reached new records in 2022.
• LNG Carrier Orders: Chinese shipyards accounted for more than a third of global LNG carrier orders in 2022.
• European Gas Demand: European gas demand declined by over 70 bcm in 2022.
• Chinese LNG Demand Uncertainty: 40 bcm of demand uncertainty for the global LNG market in 2023.