Tashkent, Uzbekistan (UzDaily.com) -- Large-scale measures to curb economic activity taken to combat the spread of COVID-19 have sharply reduced demand for natural gas, bringing down prices for both LNG and pipeline gas.

<h3>Current state</h3>

According to experts, the situation on the global gas market remains unstable. In this context, experts note the following main points.

First, the rise in prices. The excess of supply over demand led to the fact that prices in the largest regional gas markets - in the Asia-Pacific region, North America and Europe - dropped to US$2 per 1 million BTU in the first half of this year. However, in October, prices rose rapidly in the US and on European stock exchanges. By the end of the month, Henry Hub had risen to US$3.3 / BTU, up 57% from the September reporting period. This is the highest rate since March 2019. First of all, prices began to rise in connection with the growth in demand amid a cold snap.

Second, the growing demand for gas in Asian countries. Gas demand in China is expected to grow by 10% next winter. China’s LNG imports in January-September this year have already increased by 10%. At the end of 2020, as reported by Chinese analysts, the growth in gas demand will amount to 4%, and in absolute terms consumption may reach 320 billion cubic meters. m.

In September, Japan saw a slight increase in supplies compared to the same period last year. India is also increasing its LNG purchases this fall. Thus, the growth of imports in September amounted to 6.2% compared to the same period last year. On an annualized basis, New Delhi’s LNG purchases this year have not yet recovered to last year’s levels due to the spring lockdown.

Against this background, in October, the Asian market saw a rapid rise in prices for LNG. Compared to the reporting period in September, the JKM index added 37%, reaching almost US$7 per 1 million BTU. On some days, prices exceeded the psychological barrier of US$7 per 1 million BTU. The last time the price of spot LNG in Asia was at this level in October last year.

<h3>Prospects for the global gas market</h3>

In the short term, industry analysts are cautious in forecasting a gradual rebound in pipeline gas demand amid lower temperatures. In addition to the weather, the market drivers include an increase in demand for electricity, a stronger demand for LNG in Asia, a reduction in gas imports from Norway, and a decrease in electricity generation at nuclear power plants in France.

However, the gas surplus on the market persists, and the consequences of the crisis will obviously be felt in 2021. At the same time, in the medium term, the pace of economic recovery will play a decisive role in normalizing the situation on the gas markets.

In the long term, the strategic goals of many countries for decarbonization can significantly affect the prospects for natural gas in the global economy. In October, two leading Asian economies announced plans to achieve carbon neutrality by 2050: Japan and South Korea. Such declarations are already becoming the energy "mainstream". In September, China announced similar plans, only with a target for decades to come (by 2060). Even earlier - the European Union at the supranational level, as well as a number of EU member states, some states of the USA, Norway, South Africa, Singapore, New Zealand, etc.

However, despite the strategic goals set, the prospects for gas look good for the next 15-20 years. At the same time, for a quick refusal from gas, there are objective legal restrictions in the form of long-term contracts for the purchase of LNG in many countries. For example, in Japan, a significant proportion of long-term contracts (over 50%) expire only in the 2030 - early 2040s. In South Korea, the share of such contracts is slightly less than 50%.

In general, in the next decade, the prospects for the gas market will be constrained by the development of renewable energy sources and hydrogen technologies, but still gas will retain a key role in many countries. At the same time, consumer interest in such new products from traditional suppliers as "decarbonated" gas, ammonia, and hydrogen will grow.