Gas Demand Set for First Drop Since 2022 on Iran War, IEA Says
(Bloomberg) -- Global gas demand is poised for the first annual drop since the 2022 energy crisis because of higher prices caused by the Iran war, according to the International Energy Agency.
That demand destruction has been evident in Asia in the first half, with consumers using less or switching to alternative fuels, while Europe also saw stronger renewables output, the IEA said in a quarterly report published Tuesday. Together with lower gas usage in the Middle East, that should push global demand down 0.5% this year, even as consumption rises in some regions.
The Middle East conflict effectively cut off about a fifth of global liquefied natural gas supply, with key gas price benchmarks in Europe and Asia up between roughly 40% and 70% since the war began. Importers in places including India, Bangladesh and Vietnam — which previously expected to raise demand — have had to rethink their longer-term gas strategies and look for alternatives.
“A prolonged supply shock would continue to progressively tighten the global LNG balance, heightening competition for cargoes and extending the prospect of weaker imports across both the Atlantic and Pacific basins,” the IEA said.
While traffic through the vital Strait of Hormuz improved since the US and Iran struck an interim peace deal last month, there’s still little clarity over a lasting solution to manage the chokepoint. Fresh attacks on shipping in and around the strait have also tested the truce and highlighted the continued risks to vessels.
Strong growth in new LNG supply, including in the US, partially offset the decline in Gulf deliveries through June, but any delays in the recovery of Middle Eastern exports could tip the global market into the first annual drop in supply since 2012, the IEA said. Otherwise, global LNG supply should remain steady this year, compared with previously expected growth.
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