This blog post is part of a special series based on the October 2024 edition of the Commodity Markets Outlook, a flagship report published by the World Bank. This series features concise summaries of commodity-specific sections extracted from the report. Explore the full report here.
The World Bank’s natural gas price index rose by nearly 4 percent in November, reaching its highest level since December 2023. This increase was primarily driven by an 8 percent surge in the European benchmark, reflecting a steeper-than-anticipated decline in storage levels and heightened uncertainty surrounding the Ukrainian transit of Russian gas. In the United States, natural gas prices rebounded sharply in late November after hitting record lows earlier in the month. Looking ahead, European natural gas prices are projected to rise in 2025 before moderating in 2026, while U.S. prices are expected to increase significantly in 2025 and continue to edge higher in 2026. Upward risks to the forecast include conflict escalation in the Middle East, broader geopolitical developments, increased competition for LNG shipments, interruption in the supply or Russian natural gas to Europe, and colder temperatures. Downward risks include weaker growth in East Asia.
Global natural gas consumption returns to pre-pandemic growth. Global natural gas demand is projected to grow by an estimated 2.5 percent in 2024. After the turmoil of COVID-19 and the Russian invasion Ukraine, growth in global natural gas consumption in 2024, 2025, and 2026 is expected to return to its 2015-19 average. Growth is primarily driven by Asia-Pacific region, Middle East and Eurasia. Consumption growth is expected to be similar in 2025 and 2026, with Eurasia demand expected to moderate and European and North American demand to stagnate. As a result, European countries will not be able to rely on shrinking consumption in 2025 and 2026, as they did in 2022 and 2023, to reduce exposure to global natural gas markets. As European substitution away from Russian natural gas has increased the bloc’s competition with Asia Pacific for LNG shipments, the strong increase in demand for natural gas from this region in 2025 and 2026 represents a clear upward risk to prices in Europe.
The tightness of natural gas supplies in 2024 is expected to persist in 2025 and 2026. In line with demand projections, global natural gas supply, which increased by an estimated 1.6 percent in 2024, is expected to grow by over 2.3 percent in both 2025 and 2026. The growth in 2025 is anticipated to come from diverse regions, including Asia Pacific, Eurasia, Middle East and North America. In contrast, an estimated 60 percent of the additional supply in 2026 is expected to originate from the Middle East and North America. A rebalancing of supplies to Europe is also likely. European natural gas imports from outside the bloc already declined by over 10 percent in 2024Q3 (y/y), notably from Algeria, Qatar, Tunisia, and the United States. There is also a significant risk of further declines in 2025 if the agreement for Russian gas transit through Ukraine is not renewed—a highly likely scenario. If this occurs, more than 5 percent of Europe’s gas imports will need to be sourced from alternative LNG suppliers.
Natural gas storage in the European Union is under pressure from high withdrawal rates. As of the first week of December, European storage levels stood at 82 percent of capacity—a 15 percent decline from their peak—following higher-than-expected withdrawals in November. If current forecasts of Europe experiencing its coldest winter since 2020 prove accurate, this would exacerbate supply tightness, particularly given the anticipated cessation of natural gas flow through Ukraine. In contrast, natural gas inventories in the United States reached an eight-year high in November, standing nearly 10 percent above the 2017-21 average. Robust natural gas production has supported the continued strength of U.S. storage levels.
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