Cheaper coal and a strong uptick in renewable fuels will hinder global demand growth for natural gas, the International Energy Agency (IEA) said June 8 in its annual “Medium Term Gas Market Report.”

While natural gas is the only fossil fuel that will not experience a decline in its share of the energy mix, its expansion will slow and a glut is possible, the agency reported. The forecast for 2015 to 2021 is 1.5% annual growth, compared to average annual increases of 2.5% from 2009 to 2015. Forecast growth is lower than the 2% seen in last year’s report.

Also hampering demand is an expected decrease in imports by Japan and South Korea, the world’s leading importers of LNG. This comes about just as LNG export capacity ramps up significantly between now and 2021, mostly in the U.S. and Australia.

“Developments are pointing to a period of oversupply,” Fatih Birol, the IEA’s executive director, said the report. “The next five years will witness a reshaping of the global gas trade.”

The oversupply will maintain downward pressure on global spot natural gas prices, with Europe as the preferred destination for “unwanted” LNG because of the economics of its spot markets and flexibility of its distribution system. Birol expects intense competition among producers to hold onto European customers.

“We are at the start of a new chapter in European gas markets,” he said.

The IEA anticipates that weaker demand in Asia will leave LNG buyers in that region over-contracted, which it expects to accelerate a movement toward more flexible contract structures. Oil markets are expected to rebalance before gas markets, which will encourage the trend toward hub pricing and reduce oil exposure in long-term contracts.

The report highlights the danger of reducing LNG capacity, citing numerous events from terrorist attacks and sabotage in Africa to natural disasters like hurricanes Katrina and Rita in the United States that have knocked LNG facilities out of service. The collapse in investment (no final investment decisions made on liquefaction plants in 2016) also raises concerns about the security of natural gas supplies and the potential for tighter markets in the next decade.

Joseph Markman can be reached at jmarkman@hartenergy.com and @JHMarkman.