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Most of Europe now set for warmer-than-usual January: Weather Company

Highlights

Revision from previous expectation of cold January weather

European gas stock withdrawals slow on mild weather

European gas prices continue to tumble from record highs

Most of Europe is now set for warmer-than-usual temperatures in January, according to the latest forecast from the Weather Company published Dec. 30, a potential pointer toward more bearish conditions on European gas markets.

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Mild weather across much of Europe in the past week has contributed to a sharp decline in prompt European gas prices, which have tumbled since prices hit a new record high on Dec. 21.

According to S&P Global Platts price assessments, the TTF day-ahead price hit an all-time high of Eur182.78/MWh ($60.36/MMBtu) on Dec. 21, an increase of 985% year on year.

Prices have cooled since on milder weather and an expected increase in LNG imports, with the TTF day-ahead contract assessed Dec. 30 at Eur78.65/MWh.

In its latest medium-term forecast, the Weather Company said western, central and eastern Europe were now expected to see temperatures slightly above seasonal norms in January.

That is a revision from a previous forecast in late November of temperatures in January slightly below normal for the time of year.

It added that given recent trends in medium-range models towards a strong positive North Atlantic Oscillation pattern by mid-month, "there is still warmer risk to this forecast."

Only the far north of Europe is still set for colder-than-normal weather in January, it said.

The closely watched forecast also pointed to a warmer-than-usual February in northern Europe, but a risk of cooler temperatures for southern Europe.

For March, the Weather Company still sees warmer-than-usual temperatures across the entire continent.

The UK, meanwhile, is set for temperatures above the seasonal norm in January, according to the UK Met Office.

For the period Jan. 4-13, the Met Office said temperatures were expected to be above average, although some temporary colder periods are likely.

"Through the second half of January, temperatures are overall expected to remain slightly above average as a result of mild spells and shorter-lived colder periods," it said.

Stock levels

The increasing likelihood of a relatively mild winter comes as European gas stocks remain at historically low levels, though withdrawals have slowed over the past week given the warmer weather.

According to data from Gas Infrastructure Europe, storage sites in the EU and UK were 56% full as of Dec. 29, compared with a level of around 75% at the same time in 2020.

However, stock levels have remained around 56% for several days as injections offset withdrawals, with some countries seeing net injections on Dec. 29, including Germany, France, Austria, and Denmark.

The weather can cause sharp deviations in gas demand in Europe, with a shift in temperatures by just a few degrees having a major impact.