A continuing cold blast across Europe, something we pointed out at the first of the month was forecasted to happen, has led to higher energy prices and drawn down NatGas inventories.
We explained on Dec. 1 that a weather phenomenon known as a "Greenland blocking" event would pour cold Arctic air over Europe in the first half of the month.
Dear Europe:— ClimateCharts (@ChartsClimate) December 8, 2022
Winter IS Coming
The world is about to see how well just the beginning efforts of NetZero policies handle a small cold outbreak.
And it’s only mid-December… pic.twitter.com/l1yWMBjsbm
Latest forecasts via Bloomberg show average temperatures across Northwest Europe are expected to continue sliding well below a 30-year trendline to around 27 degrees Fahrenheit by Dec. 18.
The cold blast has already boosted heating demand across the energy-stricken continent. The forecast for even colder weather next week will indicate even larger future NatGas draws from storage.
After building up inventories to nearly 96% full last month due to warmer autumn weather, the injection to withdrawal flip is about a month in and drained about 5% of storage to 90% full. Seasonally, the withdrawal period is well underway, so draws will continue for the next several months (as long as there is cold weather).
What could drive levels down even further are vicious cold snaps.
Europe's winter temperatures have taken a while to arrive, but now seem to be coming in at full strength. Gas storage sites are still relatively full for the time of year, but risks still linger that a severe cold spell could quickly deplete stocks, leaving the continent exposed to any new supply curtailments. -Bloomberg
most of poland and half of germany will be near 0-5 degrees F next week pic.twitter.com/g6oKfXIzzi— Zambo (@ailliwre) December 7, 2022
Australia's ANZ Bank wrote that forecaster Maxar said the weather outlook for the next few weeks would be extremely cold for the UK and Nordics. Heading into the cold season, traders saw NatGas supplies at ample levels, and some expected Europe would easily survive this winter without a crisis. However, politicians in France are already warning about potential power cuts due to issues with nuclear power generation, while the lack of grid interconnectivity with other countries could result in power crunches.
Dutch front-month NatGas futures, Europe's benchmark, have rebounded more than 52% to 150 euros per megawatt-hour since Nov. 11 on colder weather forecasts.
Month-ahead German, French, and UK power are rising as it becomes more expensive to fuel the continent's power generation stations.
As we explained earlier this month, this cold blast will be the first proper test of the EU's power grid.