Cold weather forecast and conflict in Europe over Russian Pipeline sending natural gas price higher

According to World Oil, temperatures are set to drop starting this week. In Europe, France, Spain, and Germany are forecast to be colder than usual; while in some parts of Italy, temperatures may drop 2 degrees Celsius below normal. Carlo Cafaro, a senior research analyst and meteorologist at Marex said the cooler temperatures in the south of France will coincide with stormy weather over the Mediterranean bringing flooding and mudslides, which will cause more volatility in weather patterns, pushing energy prices higher this winter.

Europe has experienced significant shortage of natural gas supplies even back in the fall. In September, shortages of labor, supplies as well as power outages resulted inventories falling below the 10 year average. In early October,  Dutch TTF natural gas price (Europe’s benchmark natural gas price) surged above €100 per kWh for the first time, equivalent to $36/MMBtu or $205 per barrel for crude oil. Wholesale prices across Spain, Germany, and United Kingdom have also climbed above €70, resulting in energy suppliers shutting down, and consumers bearing high costs for heating bills.

The development of the La Nina weather pattern in the Pacific basin means possible colder-than-average temperatures in Northeast Asia during the winter months. In Asia, especially in China and Japan, snow has started early comparing to last year. According to BBC report, China’s North-eastern provinces have experienced the highest snowfall in almost 116 years. Reuters also reported that the Chinese government is considering to add more coal and natural gas supplies to ensure there is enough capacity to deal with extreme cold weather events.  

European natural gas prices fell in mid October after Russian President Vladimir Putin promised to deliver gas shipment. This morning, however, Germany’s energy regulator suspended the approval process for the Nord Stream 2 gas pipeline from Russia, adding further uncertainty about supplies. The decision is likely to set the project back several months and even when it does receive German approval, it will still require a green light from the European Commission.

“Following a thorough examination of the documentation, the Bundesnetzagentur concluded that it would only be possible to certify an operator of the Nord Stream 2 pipeline if that operator was organized in a legal form under German law,” the regulator said in a statement.

Political divide in EU over the Nord stream 2 project continued to delay adequate supplies ahead of winter season; meanwhile, European gas prices have surpassed €83 per megawatt-hour in mid-November, the highest in three weeks.

 

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