The global natural gas supply crunch is likely to continue until next summer, and this situation could lead to long-term demand destruction. This prediction comes from the International Gas Union (IGU), which represents 90 percent of the world's gas producers.
Europe's Challenges in Meeting Winter Needs
According to Manolis Ydreos, Secretary General of IGU, the market currently clearly indicates that conflicts are likely to persist. Ydreos noted that Europe is currently competing with Asia for gas storage to meet its needs. The rise in natural gas prices, which reached the highest level in three years, has impacted demand, but it is still unclear whether this decline is temporary or will lead to permanent demand destruction.
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Global Impacts and Construction in Asia
According to a recent report by Global Energy Monitor, Southeast Asian countries are still constructing natural gas power plants, despite rising prices due to the war in the Middle East. Asian countries are also increasing their LNG import capacity. Ydreos stated in this regard, "The question is whether this demand will return to normal after the market stabilizes or whether it will have long-term consequences in policies."
Goldman Sachs is optimistic about the long-term outlook for gas demand, predicting that prices in Europe may decrease from around 70 euros to 50 euros per megawatt-hour if the flow of liquefied natural gas from the Gulf improves. However, they believe that these chances are never zero and expect European gas prices to average 70 euros per megawatt-hour.
In the 30 days leading up to September 24, gas prices in Europe increased by more than 17 percent, reaching 80 euros per megawatt-hour. Coal consumption in Europe may increase by up to 25 percent due to rising gas prices. These changes reflect the efforts of electricity producers to reduce costs in one of the largest gas-importing regions in the world.
Given the European Union's sanctions on Russian LNG imports, it is expected that more liquefied natural gas from Russia will be supplied to Asia in the near future. This trend may lead Europe to seek to meet its needs from other sources, although this issue faces serious challenges in the EU's climate change policies.
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