Natural gas production jumped 8% in February, IEA says

Russian military offensive in Ukraine created 'unprecedented uncertainty and volatility' for European and Asian natural gas markets, Paris-based agency says

The Astora underground natural gas storage facility in Rehden, Germany. Getty Images

Total natural gas production from the Organisation for Economic Co-operation and Development countries jumped 7.9 per cent on an annual basis in February.

All three regions — the Americas (+8.6 per cent), Asia Oceania (+7.8 per cent) and Europe (+4.2 per cent) — experienced an increase in year-on-year production levels, the International Energy Agency said in its report on Thursday.

The countries driving the increase, by volume of production, include the US, Canada, Australia and Norway.

However, despite the overall positive trend, the Netherlands experienced a large drop of 16.4 per cent on a yearly basis, the Paris-based agency revealed.

The Russian military offensive in Ukraine has created “unprecedented uncertainty and volatility” for both European and Asian natural gas markets, it added.

Natural gas, which contains many different compounds, is a fossil energy source formed deep under the earth's surface.

It is the cleanest burning and fastest growing fossil fuel, currently accounting for about a quarter of global electricity generation. But its longer-term use is uncertain in a transition to net-zero energy systems.

The agency said imports of natural gas were 3.4 per cent lower year-on-year in February, while the total exports of the gas surged nearly 6.2 per cent compared to the prior year period.

Asia Oceania (-18.8 per cent) led the reduction of imports, mainly due to significant drops in imports from the US and Qatar.

On the other hand, Europe (+2 per cent) experienced a growth in imports, mainly due to an increase in orders from the US (+130 per cent), and despite a significant reduction of imports from Belarus (-69 per cent), Ukraine (-38 per cent) and Russia (-8 per cent).

The gross consumption of natural gas decreased by 2 per cent in February, compared to the same month last year, the agency said.

Although Asia Oceania (6.9 per cent) and the Americas (0.4 per cent) experienced a jump in gross consumption, the tightness of European gas markets and the invasion of Ukraine resulted into a 9.4 per cent reduction in Europe’s consumption year-on-year.

The largest drops were seen in the UK (-16.6 per cent), Germany (-12.1 per cent) and the Netherlands (-24.5 per cent).

In a separate report released on Thursday, the agency said the total OECD indigenous production of crude oil, natural gas liquids and refinery feedstocks increased by 10.3 per cent yearly in February.

While a decrease was observed in Europe (-3.1 per cent), both Asia Oceania and the Americas — the largest producer with a share of 86 per cent of total OECD indigenous production — experienced increases of 2.1 per cent and 12.7 per cent, respectively.

The refinery gross output of total products grew by 15.1 per cent in the month on a year-on-year basis, whereas the net deliveries of total products grew in February by more than 12 per cent compared to the same period last year.

OECD oil stock levels on national territory stood at 491 million metric tonnes in February.

It decreased by 2,895 kilotonnes in the month compared to the closing stock levels in January. The reduction was driven by the Americas (-3650kt) and Asia Oceania (-620 kt), while a stock build was observed in Europe (+1376kt).

Last month, the agency cut its oil demand forecast for the year because of Covid-19 lockdowns in China and weaker-than-expected demand growth in advanced economies, especially the US.

Demand for the year was lowered by 260,000 barrels per day from March's projection to 99.4 million bpd for 2022.

"Soaring pump prices and slowing economic growth are expected to significantly curb the demand recovery through the remainder of the year and into 2023," the IEA said on Thursday in its monthly report.

"Extended lockdowns across China ... are driving a significant slowdown in the world's second largest oil consumer," the agency said.