IEA Gas Market Report Q1 2022 - China for the first time the world's largest LNG importer

According to the latest gas market report from the International Energy Agency (IEA), supply on international markets in 2021 failed to keep pace with the 4.6 percent increase in global demand for natural gas compared with 2020. This has led to shortages in the market and extreme price spikes. As a result, 2021 ended with historic record prices on gas spot markets in Europe and Asia. Due to the high prices, demand growth had slowed to around 3 percent in the second half of 2021, down from 7 percent in H1 2021.

Economic recovery and continued weather extremes are cited as reasons for the increase in demand. Gas demand has grown particularly strongly in China, up 17 percent compared to 2020. As a result, China has become the world's largest LNG importer for the first time, displacing Japan from first place. In Europe, gas demand has increased by 5.5 percent.

The situation in Europe is characterized by losses in gas production in the UK and the Netherlands and declining pipeline gas supplies from Russia. Offsetting this were increased LNG supplies, primarily from the U.S., which contributed 40 percent of the growth in LNG supply in Europe. As a result, the U.S. has become the largest LNG supplier to Europe.

Pipeline gas supplies from Russia decreased by 25 percent in the fourth quarter of 2021 as a result of lower transit flows via Belarus and Ukraine and reduced supplies to Turkey. In terms of 2021 as a whole, there was nevertheless an increase in Russia's pipeline exports, albeit driven entirely by sharply higher deliveries to Turkey, while deliveries to the EU decreased by 3 percent.

The filling level of gas storage facilities in Europe is cited as another important factor for the market situation in recent months. On October 1, 2021, at the start of the heating season, storage levels were 17 percent below the five-year average. At the end of January 2022, gas storage capacity in Europe was only 38 percent full, nearly 30 percent below the five-year average determined at that time.

High gas prices have also impacted power generation in northwestern Europe. There, gas has been replaced by coal. The resulting increase in demand for CO₂ allowances was an additional driver for CO₂ quotations, which reached historic record levels. The significant overall rise in prices for input fuels for power generation and subdued electricity production by French nuclear power plants due to outages also pushed wholesale electricity prices to new record highs. In Southern Europe, the sharp decline in electricity generation from hydropower had led to an increase in the use of gas for power generation.