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Natural gas market developments: prices bouncing back from the cold

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Natural gas market developments: prices bouncing back from the cold

This blog post is part of a special series based on the April 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.

After experiencing large drops in 2024Q1 due to a mild winter, natural gas prices rebounded in mid-June. By the last week of June, U.S. and European natural gas prices were 80 and 25 percent higher, respectively, compared to their average in March. The surge in U.S. prices was driven by increased demand for power generation and expectations of higher flows from U.S. LNG (liquefied natural gas) export terminals in the coming months. In Europe, concerns over recent outages contributed to the price rise. Additionally, both markets benefited from robust LNG demand from Asia. Natural gas prices are expected to be significantly lower in 2024 than in the previous two years, with a recovery anticipated in 2025.


Global natural gas demand saw minimal growth in 2023. In the Asia-Pacific region, natural gas demand was driven primarily by China and India’s power and industrial sectors, while North America’s consumption increased marginally. In contrast, demand in Europe was 22 percent below its 2005 peak. Following two years of stagnation, global demand is expected to increase by about 2 percent in 2024 and 2025. This modest growth is expected to be driven by China and the Middle East in 2024. In 2025, however, flat demand in advanced economies will temper an expected rise in consumption in EMDEs.

Global supplies remained relatively stable in 2023.
 Record-high U.S. natural gas production offset declines in Russia and Europe. Russia’s output dropped significantly. While liquefied natural gas (LNG) exports increased and remained unaffected by sanctions, they only partially made up for reduced pipeline flows to Europe. The natural gas market is expected to remain tight in 2024 and 2025, with production increases just matching demand. Supply is poised to expand in all major producing regions except the U.S., where previous expectations of continued supply growth are now being revised.

Global natural gas trade continues to expand, enabling the buildup of large inventories in most markets. LNG trade volumes rose by about 3 percent during 2023Q4-2024Q1 compared to a year ago, driven by increasing exports from the United States, Qatar, and several African countries. Over the next two years, LNG trade growth is expected to align with rising demand in East Asia and the Pacific, particularly China, with higher exports from the United States, Russia, and Africa. The reconfiguration of LNG trade patterns following the Russian invasion of Ukraine has persisted, allowing European countries to maintain inventories at the upper end of the pre-pandemic range. This was achieved despite a significant drop in U.S. flows in May due to an outage at an LNG export facility, which lead to European imports from Russia briefly overtaking those from the United States.

Natural gas prices are forecast to be significantly lower in 2024 compared to the previous two years, with a recovery anticipated in 2025.
However, prices could be higher than projected due to geopolitical developments, reduced U.S. exports, and adverse weather conditions. Conversely, a weaker-than-expected global growth outlook, particularly in East Asia and the Pacific, could result in lower prices. The forecast assumes a planned 50 percent increase in U.S. LNG export capacity by 2025. Any delay in this expansion could exert upward pressure on global LNG and European gas prices. Lower-than-expected U.S. exports would imply downward pressure on domestic U.S. prices. Additionally, a key risk for the European market is the expiration of the transit deal for Russian gas through Ukraine, set for December 2024.

Paolo Agnolucci

Senior Energy Economist, EFI-Prospects Group, World Bank

Matias Guerra Urzua

Research Analyst, Prospects Group, World Bank

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