HE gas consumption In Europe, the heating season has shown a notable reduction in gas use, reflecting a 16% decline from the previous year and continuing a downward trend into 2023 as renewable energy for power generation expands. The latest quarterly gas market update from the International Energy Agency presents a cautiously optimistic outlook, contrasting sharply with attitudes a year ago when the Russian invasion of Ukraine raised serious worries about energy security. Globally, gas consumption is expected to stall this year after a 1.5% drop in 2022, a pattern reminiscent of the 2020 lockdown period when reduced imports from Europe and Asia weighed on demand. The surge in energy prices, driven by the Ukraine conflict, followed a dramatic 80% year-over-year cut in Russian gas shipments to Europe, underscoring geopolitical risk as a key factor shaping markets. The broad picture shows energy-intensive industries facing slower production in some sectors, while others pivot toward coal as a short-term substitute, accompanyed by efficiency measures and a stronger push toward renewables.
China and the Middle East attract demand
By 2023, growth momentum is concentrated in Asia, propelled by a 3% regional uptick that is heavily influenced by China, which is anticipated to grow around 6% due to a rebound in industrial activity and greater gas use. The Middle East, including nations like Iran and Saudi Arabia, is also expected to contribute roughly 2% more demand as regional energy dynamics shift. In Europe, the heating season this year shows a pronounced drop in gas consumption, roughly 25 billion cubic meters lower, partly attributed to milder October and early November temperatures. Weather plays a significant role, accounting for about 40% of declines in the residential and commercial sectors, where households and businesses invest in heat pumps and adopt energy-conscious behaviors. The same period saw gas used for electricity generation fall by about 12% as electricity consumption in Europe declined nearly 7%, reflecting a broad slowdown in demand.
Much less gas for electricity in Europe
The IEA projects a 5% drop in European gas demand for all of 2023, alongside a roughly 15% reduction in gas used for power generation as renewable plants take on a larger share of electricity supply. Conversely, European industry is expected to grow slightly, with a projected 5% increase as energy prices shift the landscape; after peaking in the summer of 2022, industrial activity has softened between mid-December and the end of the first quarter of 2023, easing pressure on gas use. North American demand rose strongly in 2022 and is anticipated to ease by about 2% this year, aligning with broader market stabilization. The report also notes a spectrum of uncertainties and risks that cloud the initial optimism, including weather patterns that could deliver a hotter or colder season than expected, potential further reductions in pipeline gas shipments from Russia to Europe, and the pace at which LNG can be absorbed into global markets. On LNG, the outlook calls for an approximate 4% rise in supply, equating to around 20 billion cubic meters, with roughly half of that increase anticipated to come from the United States, a factor that could elevate the United States to the forefront of sea-borne gas exports.