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Rystad Energy: impact of fluctuating weather in northern hemisphere

Published by , Editorial Assistant
World Pipelines,

Though predicted to be warmer than normal due to strong El Nino conditions, winter 2023-24 in the northern hemisphere has so far seen sporadic cold snaps (and risk of disruptions in the Red Sea) which have prevented a runaway drop in prices.

Rystad Energy: impact of fluctuating weather in northern hemisphere

In Europe, front-month Title Transfer Facility (TTF) prices have declined week on week from US$11.5 per million Btu to US$10.5 per million Btu at the time of writing, with Asian spot prices down from US$11.9 per million Btu to US$11.5 per million Btu over the same period.

We may see some colder-than-normal temperatures in the coming week, but overall fundamentals are too comfortable to allow prices to increase materially.


Norwegian pipeline gas volumes held above 350 million ft3/d through most of December 2023, with nominations for 3 January 2024 totalling 352 million ft3/d.

Even with the start-up of Snohvit LNG, Norwegian pipeline exports have inched up year on year after averaging 331 million ft3/d in December 2022.

The market has all but written off risks associated with Russian pipeline supply to Europe.

In December 2023, the European Council unveiled a proposal that will allow EU member states to end imports from Russia by blocking companies from Russia and Belarus from booking pipeline and regasification capacity.

While this as a sign of confidence that EU gas fundamentals are comfortable enough, it could be a marginally bullish signal if Russian gas or LNG are replaced with non-Russian LNG.

Events in the Red Sea have escalated with Houthi rebels continuing drone and missile attacks on vessels crossing the Bab El-Mandab Strait.

LNG vessels have not yet been attacked, although multiple vessels have been diverted onto longer routes to Europe and Asia.

BP and Equinor are also reportedly avoiding using the Red Sea for shipments.

Further, high volumes of gas in storage in Europe (86.6% as of 1 January 2024, relative to 83.3% a year ago) make an immediate price impact from the Red Sea attacks unlikely.

A protracted conflict could divert more trade flows towards the Cape of Good Hope but even this would have only a marginal upward impact on prices (likely less than US$1 per million Btu) since it avoids Panama Canal fees with the potential for further optimisations through swaps.

The capacity of the global economic system to absorb high commodity prices has largely been exhausted – any further price surges would only fan more inflation-taming rate hikes and weaken the already fragile demand recovery seen in Europe’s industrial sector.

Gas consumption for heating could see some upside in the coming week as temperatures in Northwest Europe are expected to hit -4°C, up to 6°C below normal for this time of year.

Sporadic cold snaps this winter have underscored the unpredictability of weather forecasts as expectations have centred around the impact of the El Nino phenomenon which is known to cause warmer-than-normal temperatures during the northern winter.

This means that even reversions to normal could induce volatility in consumption and prices.


Weather in East Asia has similarly been characterised by sporadic dips to below normal temperatures in December 2023, but forecasts points to normal to above-normal temperatures, which will weigh on gas and power consumption for heating.

However, a key bearish indicator is Chinese industrial consumption. For the third month in a row after a brief expansion in September, China’s National Bureau of Statistic’s Manufacturing Purchasing Manager’s Index (PMI) unexpectedly came in below 50 (indicating a contraction) in December.

In Japan, the Ishikawa earthquake has shut-in about 1.55 GW of coal-fired generation capacity with unclear restart dates.

While current LNG inventories in Japan are high enough to mitigate any prompt requirements, an extended shut-in (as in the case of the March 2022 earthquake) could see the power system draw on more LNG later in the year.

US sanctions on Arctic LNG-2 have also blurred the outlook for the project’s start up and continued operation.

The project’s shareholders have suspended their participation with Novatek declaring force majeure on its share of contractual volumes for customers.

Further, the delivery schedule of the Arc7 carriers needed to transport the LNG to trans-shipment floating storage units (FSU) which are also under sanction remains unclear.

As such, at least some production from Arctic LNG-2 Train 1 is likely to be lost or deferred, which will support prices later in the year.


Henry Hub prices have increased on the week from around US$2.6 per million Btu to US$2.7 per million Btu – likely because weather forecasts are pointing to below-normal temperatures until mid-January, after a substantially warmer-than-normal December 2023.

At these prices, the full cost of US LNG delivered to Europe works out at around US$6.6 per million Btu and to Asia at around US$8 per million Btu.

These are both much lower than TTF and Asian spot LNG prices, implying continued high utilisation of US LNG facilities, which averaged 105% in December.

Gas production growth, which was supported through 2023 by the oil-directed Permian Basin, is also slowing with December 2023 dry gas production averaging 104.6 billion ft3/d compared to 104.59 billion ft3/d in November 2023.

However ample volumes in storage mean Henry Hub prices are unlikely to exceed the recent maximum of US$3.6 per million Btu in November 2023 anytime soon.

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