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Europe’s Energy Security To Be Tested As Temperatures Plummet

After an unseasonably warm October and most of November, cold weather settled in most of Europe at the beginning of December and weather forecasts point to a colder-than-normal start to the winter in northern Europe and the UK, which will put Europe’s ability to keep the lights and heating on to the test.

Europe managed to fill up gas storage sites ahead of schedule, thanks to an influx of LNG imports and warmer weather in October. Germany, for example, just saw its third-warmest autumn since records began in 1881, its national forecaster Deutscher Wetterdienst said on Wednesday.

But now gas demand in Germany and elsewhere in Europe is starting to boom as temperatures plummet.

The benchmark gas prices at the Dutch hub Title Transfer Facility (TTF) jumped earlier this week as the cold snap began, with prices settling on Tuesday at the highest level in six weeks.

The UK equivalent price also surged as gas demand for power generation was high due to low wind speeds. On Tuesday, gas produced 61.6% of British electricity, nuclear accounted for 11.9%, and wind for just 3.8%, while coal provided coal 3.0% of UK electricity, National Grid said.

In the latter half of December, the chance of frost and fog, along with below-normal temperatures and spells of wintry precipitation, is slightly higher than usual, the UK’s Met Office said on Wednesday. 

Overall, current weather forecasts show that this winter could be colder than usual, especially in northern Europe.

“The cold start to December would yield increased demand in central and northern Europe, with the potential for this continuing into the latter half of the month if Arctic blocking remains strong,” Matthew Dross, a meteorologist at Maxar, told Bloomberg on Thursday.

There are signs of early cold snaps in Asia, too, which, if protracted and combined with a colder European winter, could prompt another run of LNG purchases.

Despite nearly full storage, Germany may have to take drastic measures such as gas rationing if levels of gas in storage drop below 40% by February 1 next year, according to the German Federal Network Agency, which will enact such measures if necessary.  

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By Tsvetana Paraskova for Oilprice.com

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