Bloomberg reported that Europe is preparing to face the most severe cold spell this winter, with temperatures forecast to drop sharply this weekend due to the movement of low-pressure areas.
Temperatures are set to hit record lows in many major cities. According to data from Weather Services International, average temperatures in London, Paris and Berlin will drop below zero degrees Celsius on January 3 and 4, about 6 degrees Celsius lower than the 30-year average.
In the UK, the Met Office is forecasting snow, strong winds and heavy rain. In Germany, the DWD weather agency has also issued a frost and ice warning.
The cold snap is expected to cause a surge in heating demand, forcing countries to tap into gas reserves that have fallen below 75%. This year’s drawdowns have been faster than usual, raising supply concerns as a transit deal between Ukraine and Russia expires today (December 31).
Natural gas prices in Europe are already near record highs reached in early December. Losing Russian gas flows could make Europe more dependent on liquefied natural gas (LNG) from the United States. However, cold weather in the United States is also pushing up domestic demand.
On the morning of December 30, natural gas futures prices in the US increased sharply as weather models continued to show that a strong cold front would sweep through most of the eastern region in the coming days.
This Arctic air mass is forecast to last for weeks across the eastern half of the United States, with a high chance of snow and ice in some places.
Traders reacted to forecasts of a significant increase in heating demand, as reflected in updated "heating degree days" indicators.
In the morning trading session on December 30, the price of natural gas futures for February delivery jumped 12.3% to $3.80 per million British thermal units (MMBtu).
Technical analysts say prices have broken through key resistance at $3 during this year's heating season, marking a recovery from multi-year lows following a surge near $10 in mid-2022.
Weather forecasting firm BAMWX told clients that the Arctic cold snap, or “polar vortex,” will hit the eastern half of the United States in the second week of January or mid-month. “We are now starting to think about the possibility of a historic cold snap,” BAMWX warned.
With the cold weather forecast, gas prices could continue to come under upward pressure, posing a major challenge for consumers and the US energy market in the coming weeks.
