Cooling down: after an extremely strong growth in the first half of 2021, global gas demand has markedly slowed down in the Q3 2021, based on first data estimates.
Gas demand grew by close to 8% in key gas regions in H1, largely driven by colder winter/spring temperatures, droughts and strong economic recovery. demand growth has been almost equally distributed across Europe, Russia and the Asia Pacific region.
When looking at the third quarter, the picture is changing, with gas demand growth moderating to ~1.5% and mainly concentrated in the Asia Pacific region, largely supported by China.
There are three main reasons behind this slow down:
- Record high gas prices are driving gas-to-coal/oil switching: in the EU gas-fired generation collapsed by over 20% yoy in Q3, while coal-based power output grew by 20%. in the US gas-fired generation dropped by 5% (vs coal up by 14%).
- Growth in economic and commercial activity is slowing down, partly due to high energy prices, translating into production curtailments in gas- and energy intensive industries. China’s PMI for October dropped to 49.2 -its lowest point since the covid lockdowns.
- Last year’s Q3 already marked a return close to normal in terms of gas demand, vs the very low base of Q1-2.
What is your view? How will gas demand evolve in the coming months? China’s winter demand is expected to rise by close to 10% according to PetroChina. In the US and Europe, gas-fired power generation, is set to remain depressed at current price levels, but of course a colder winter could boost up demand…
Source: Greg MOLNAR (LinkedIn)