A mild winter in the Northern Hemisphere, plunging natural gas prices in Europe the United States, a past crisis in Europe?

Although Europe the US will have a mild winter now until mid-January, a cold snap is likely to return in late January. Markets remain concerned that any unexpected extreme weather poses risks. Another prolonged cold snap could deplete Europe's gas stocks push fuel prices higher again. In addition, European utilities will soon need to start planning fuel stocks for next winter to avoid another shortage.

Natural gas prices in Europe the US have tumbled as temperatures in the northern hemisphere rebounded sharply following the Christmas Day winter storm that swept across North America, producing unusually warm weather.

U.S. natural gas futures fell below $4 for the first time since February 2022 as an unusually mild weather outlook in parts of the northern Hemisphere sparked a sell-off.

Natural gas for February delivery fell 11% to $3.993 per million British thermal units on the New York Mercantile Exchange on Tuesday, Jan. 3. Dutch natural gas futures, the European benchmark, closed at 75 euros a megawatt-hour on Jan. 3, lower than before the geopolitical conflict erupted in February last year.

Natural gas reserves in Europe the US remain high as the Northern Hemisphere braces for a mild winter

One of the main reasons gas prices in the U.S. Europe have plunged at the start of the New Year is that the Northern Hemisphere is experiencing a mild winter, which will significantly reduce demand for heating.

The winter storm that swept across North America on Christmas Day is over before the New Year, much of the United States will see warmer-than-normal temperatures now until mid-January. Noaa's new 6-10-day temperature forecast calls for above-average weather in nearly all of the lower 48 states. This will reduce the demand for heating.

Historically, U.S. natural gas reserves typically peak at net withdrawals in mid-November then decline

在大洋彼岸的欧洲，类似的故事也在上演。欧洲天气大幅转暖，加之欧洲天然气储备并没有冬天来临前人们想象的那么低，市场对今年冬天欧洲发生停电、供暖配给等事件的担忧逐渐减轻。

Across the pond in Europe, a similar story is unfolding. Fears of power outages, heating rationing other events in Europe this winter have receded as the weather has gotten much warmer in Europe natural gas reserves have been as low as people thought before winter set in.

It's been a record-breaking few days in Europe, especially in Central Europe, a number of major cities have set record highs for the time of year. On New Year's Day, the temperature in the German capital Berlin reached 16 degrees Celsius, the highest ever recorded for January. In Warsaw, Poland, New Year's Day temperatures were more than 5 degrees Celsius higher than the record. The Czech Republic had its hottest New Year's Eve on record.

There are expected to be 75.4 warmer-degree days, a measure of the energy needed to heat a home, in Europe next week, according to forecaster Maxar Technologies. That's below the 10-year average of 79.9 days.

Is Europe's energy crisis over?

Media analysis said that the market previously feared that the risk of an extreme energy supply crunch in Europe winter has been very low.

Europe's gas stocks have risen in the past few days as demand for heating has been subdued consumption is usually low during the holiday season. In Germany, gas inventories continued to rebound after falling to a low of 87% before Christmas have now climbed above 90%. Across Europe, gas reserves have reached 84%, well above the five-year winter average of 70%.

The return of strong winds in parts of Europe has also increased wind power generation.

Still, the market remains concerned that any unexpected extreme weather poses risks. If another prolonged cold snap hits later this winter, Europe's gas stocks could run out fuel prices could be pushed up again. In addition, European utilities will soon need to start planning fuel stocks for next winter to avoid another shortage.

Scientists are keeping a close eye on the Arctic polar vortex because the collapse of the weather system could drastically cool parts of Europe later this month, it's only a matter of time before cold weather returns to the United States.

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Source: Wall Street See

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