El Nino to Warm Europe This Month, Strengthening Gas Bears

  • Warm weather will probably reduce demand for natural gas
  • All six surveyed meteorologists expect warmer weather

The influence of El Nino will probably push temperatures in Europe above seasonal norms this month, increasing the bearish outlook for natural gas prices already near their lowest since 2009.

Temperatures in November will be above normal for the time of year, according to all six meteorologists surveyed by Bloomberg News. Last month was cooler than usual for most of the region, boosting gas demand by 14 percent from a year earlier in the U.K., Europe’s largest traded market, according to National Grid Plc data.

U.S. forecasters predict that this year’s El Nino, a warming of the equatorial Pacific Ocean, may be the strongest since records began in 1950, affecting weather patterns across the world. The warmth comes amid a period of abundant fuel, including a 41 percent jump in deliveries from Russia, the region’s biggest foreign supplier, that has helped increase European storage levels to near a record high.

“The European system at the moment is well supplied,” Fabio Cedronio, a senior gas trader at Repower AG, said by e-mail on Friday. “Storage is confirmed at a good level and above-average temperatures will cause a lack of demand for heating.”

European gas traders are the most bearish since May, and have been negative on prices for all but one week since April, according to Bloomberg surveys. Next-month gas in the U.K. is trading at its lowest for the time of year since 2009 and the cost of the fuel is expected to remain low for the next five years, according to Bloomberg New Energy Finance.

Scandinavian Warmth

Temperatures in northwest Europe, including the U.K., are forecast to be 2.7 degrees Celsius (4.9 Fahrenheit) above the 10-year average next week, according to data from Weather Services International Corp. using the GFS model.

“The very strong El Nino is having some influence on European climate,” Matthew Dobson, a meteorologist at MeteoGroup U.K. Ltd., said by e-mail on Friday.

Scandinavia is forecast to be the warmest region relative to normal this month, according to WSI. Temperatures are seen at 1 degree Celsius above average in Scandinavia and 0.5 degree higher in the U.K. and west Europe, according to MDA Information Systems LLC.

Record Temperatures

Last year, parts of Italy, France and the U.K. had the warmest November in 65 years, according to Dobson. This year, temperatures in the north and west of Europe may be even higher, he said.

MDA and WSI both predict above-average temperatures will last into December for some regions. In December “above normal temperatures are forecast to extend from Scandinavia into the mid-continent,” MDA said in a report. There are risks of warmer weather in the U.K. and the Iberian peninsula, MDA said.

Before it's here, it's on the Bloomberg Terminal.
LEARN MORE