It may sound flippant to argue winter is over — after all, the weather has just turned cold in Europe, it’s still the middle of January, and February and March lie ahead. For the European natural gas market, however, the season is done and dusted.
Europe is now crossing the halfway point of its heating quarter. On average, the coming days are typically the coldest of the year. Almost like clockwork, wintry weather returns and snow bedecks the annual meeting of the World Economic Forum in the Alpine resort of Davos. Indeed, from London to Berlin, temperatures have now dropped to freezing. But even if the rest of the winter turns to be colder-than-normal, the region would have enough gas in storage to avert the worst-case scenario: running out as a result of Russia reducing exports as part of its strategy against Ukraine’s allies.
For gas traders, it’s a green light to sell. The wholesale price of natural gas in Europe fell earlier this week to a 17-month low of €55 ($60) per megawatt hour, down more than 80% from a peak of nearly €350 per MWh in late August. German wholesale one-year forward electricity prices, a regional benchmark, have also collapsed, trading at around €150 this week, down from a peak of almost €1,000 six months ago.