Natural gas falls below $3 as winter pressure eases

Natural gas prices declined on forecasts that a strengthening Super El Nino in the Pacific Ocean will bring a mild winter to the Northern Hemisphere and curb heating-related energy consumption. Losing 2.16% on a daily basis, Natural Gas fell to $2.98 following its previous close at $3.05. During the session, a low of $2.93 and a high of $3.05 were tested. Joining the retreat across energy markets, Crude Oil (WTI) traded at $101.80, down 1.42%.

How will Super El Nino affect winter energy demand?

In a meeting held by the energy team of Switzerland-based investment bank UBS with meteorologist James Block, it was noted that the current El Nino phenomenon is one of the strongest recorded since sea surface temperature measurements began in the 1950s. Stating that surface water temperature anomalies in the Pacific could exceed 3.5 degrees this season, Block reported that the weather pattern will peak in January and gradually return to normal levels by May 2027.

How much will winter temperatures rise in Europe and the US?

According to meteorological models, winter temperatures across the northern US, Europe, and large parts of Asia are expected to remain above seasonal norms. While temperatures in the US Northern Plains and Northeast states are forecast to stay 1.5 to 3 degrees above average, a positive departure of 0.5 to 1.5 degrees is projected for Southern and Central Europe. At a time when natural gas futures in Europe are hovering near 90 euros per megawatt-hour, and global refinery bottlenecks and disruptions to energy flows in the Strait of Hormuz persist, a potential drop in heating demand could provide breathing room for consumers and energy markets.

Although the overall outlook points to a mild winter, James Block stated that extreme weather events, such as severe snow and ice storms that could last for 1 to 2 weeks between late January and early February, cannot be entirely ruled out. On the Asia side, while warm weather expectations remain strong for India and Japan, it was highlighted that the warming signal remains weak in northern China due to continental effects. In addition, it was noted that a calm Atlantic hurricane season and the southern storm track across the US could support wind energy generation.

This content is for information purposes only and does not constitute investment advice.