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Warmer-than-usual start to the winter in Europe and Asia and forecasts of mild weather in the United States following the Christmas winter storm have eased concerns about natural gas shortages at the start of 2023.
Natural gas prices in Europe dropped on the first trading day of the year to their lowest level since February 21, 2022, days before the Russian invasion of Ukraine, which upended energy markets and sent gas prices skyrocketing.
Mild winter weather in many parts of Europe, rising wind power generation, and lower electricity consumption started dragging European natural gas and power prices lower last week.
Weather in most of Europe has been unusually warm since the middle of December, and forecasts point to continued mild weather for another two weeks. As a result, gas demand is lower and storage levels remain at comfortable levels. Across the EU, gas storage sites were 83.5% full as of January 1, with German storage at over 90%, according to data from Gas Infrastructure Europe. Demand destruction in the industry also helps ease the upward pressure on gas prices in Europe.
In China, the weather is also relatively mild, and temperatures are likely to remain above the norms for this time of the year for the next 10 days, according to Bloomberg.
In the United States, after the Winter Storm Elliott on Christmas Eve and Christmas Day, weather forecasts point to mild temperatures and very low gas consumption.
Demand this week is expected at very low levels, according to NatGasWeather.com.
“Warmer than normal conditions will rule the southern and eastern halves of the US with highs of 40s to 60s across the Great Lakes, Ohio Valley, and Northeast and very nice 60s to lower 80s over the southern US and up the Mid-Atlantic Coast for very light national demand,” NatGasWeather.com said.
The U.S. benchmark gas price at the Henry Hub plunged by as much as 10% at $4.023 per million British thermal units (MMBtu) late on Monday.
By Tsvetana Paraskova for Oilprice.com
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Tsvetana is a writer for Oilprice.com with over a decade of experience writing for news outlets such as iNVEZZ and SeeNews.