Global natural gas demand is forecast to increase by 2.8% this year after experiencing its largest drop on record by 2.5% in 2020 due to milder winter and COVID-19 lockdowns, according to a new report by the International Energy Agency (IEA) on Wednesday, Eurasia Diary reports citing Anadolu Agency. 

The world's natural gas demand fell by 100 billion cubic meters (bcm) in 2020 down to 3,910 bcm.

This was triggered by exceptionally mild weather in the early months and the onslaught of the COVID-19 pandemic, according to the IEA's Gas Market Report, Q1 2021.

The global natural gas market continued to gain in depth and liquidity in 2020 despite shrinking demand.

"This reflects expanding volumes of liquefied natural gas (LNG) traded on the spot market and a substantial rise in volumes traded on regional gas hubs. LNG volumes traded on spot and short-term basis continued to rise in 2020," the report said.

The US continued to be the largest source of flexible LNG with a 20% share of spot and short-term volumes, while China and India remained the world's largest buyers of short-term and spot LNG with 20% and 11% market shares respectively.

In Europe, Turkey increased purchases of short-term and spot LNG by more than 50%, largely at the expense of piped imports from Iran and Russia, especially during the first-half of 2020, the IEA found.

The colder temperatures through the last month of 2020 marked the start of a gas price rally amid tightening LNG supply.

Spot LNG prices in Asia more than tripled to above $30 per million Btu by the start of January 2021, with some cargoes reportedly awarded close to $40 per million Btu, breaking the record price levels in the aftermath of the Fukushima nuclear accident in 2011, according to the report.

Increasing demand due to the colder winter, lower nuclear capacity particularly in Japan, and lower gas stocks resulted in a price rally.

"However, the price spikes are not expected to last beyond the short-term cold snaps given that market fundamentals for 2021 remain fragile. Global gas demand is expected to recover its 2019 level but with uncertainties regarding the recovery trajectory of fast-growing markets compared with more mature regions," the report said. "Sectoral demand, on the other hand, is subject to a variety of risk factors, including fuel switching, slow industrial rebound or milder weather."

Total global gas demand in 2019 was 4,008 bcm.

However, the expected gas demand recovery of 2.8%, or around a 110 bcm increase this year, is a far cry from the 7.5% year-over-year post-2009 financial crisis rebound in 2010.

With this increase, total global gas demand is forecast to reach 4,021 bcm this year with emerging markets being the main drivers of the demand growth.

Fast growing markets in Africa, Asia, Central and South America and the Middle East are projected to account for about 70% of global demand growth in 2021.

According to the IEA's forecast, mature markets are likely to see a more gradual recovery though some may remain below their 2019 demand levels.