While many parts of Europe, from Germany and France to the UK, enjoy unseasonably warm weather, a new three-month forecast indicates the increasing possibility that ‘Old Man Winter’ is set to move in.
Bloomberg reports UK’s Met Office’s three-month outlook shows a colder-than-normal winter is ahead. The forecast said there’s a 25% chance the season will be cold, a 60% chance of it being around average, and 15% of it being mild.
“The likelihood of a colder three-month period overall is slightly greater than normal,” the forecasts said.
Warm weather has been an important factor in plunging natural gas prices across Europe. Dutch natural gas futures, Europe’s benchmark, have fallen more than 70% since late August to 92.50 euros per megawatt-hour.
We wrote a note a little more than a week ago titled “Germany May Stave Off Worst Of Energy Crisis As Mild Temps Forecast Through Mid-November.”
However, abnormally warm weather is set to dissipate by mid-November across North West Europe and be more in line with 30-year averages.
Colder weather is also ahead for Germany.
And the UK.
The good news is EU NatGas storage is 94% full despite reduced NatGas shipments from Russia. Shipments via Ukraine are one of the last remaining Russian supply lines to western Europe after the bombing of Nord Stream pipelines. The US is set to ramp up LNG shipments this winter.
“The weather is quickly becoming a major factor as an unusually hot October kept gas demand in check across Europe and brought some relief for policymakers. The start of the heating season has been pushed back, allowing more gas to be injected into storage sites. The safety buffer could play a key role when the temperatures do drop, and consumption picks up again,” Bloomberg said.
Even with NatGas storage levels above a 10-year average for this time of year, colder weather in the second half of November could start drawing on inventories — and at some point, NatGas prices will reverse.
