Europe’s Warmer Weather Is Actually Melting Away Some Of Its Worries

Europe’s Warmer Weather Is Actually Melting Away Some Of Its Worries
Theodora Lee Joseph, CFA

over 1 year ago1 min

Mentioned in story

Europe may have shifted from an agrarian economy a century ago, but its fortunes lately have been increasingly tied to the weather. See, ever since Russia turned off its natural gas supplies to the European Union, the bloc has been suffering from high gas and electricity prices. Those steeper prices have been weighing on the competitiveness of its industries and have had investors worried about the risks of blackouts and recession. Markets have reflected those fears: in US dollar terms, Europe’s STOXX 600 is down 31% this year, while the S&P 500 is down 21%.

But lately, things have been looking rosier for Europe, not least because it’s been a warmer-than-usual October and it’s forecast to get warmer still. The chart above shows a good start to October, with this year’s temperatures (blue line) mostly trending above the five-year average (pink line). The balmier weather sent European natural gas prices below €100 ($99) per megawatt-hour for the first time since June. Warmer weather is great for Europe as it postpones the need for heating, reducing gas demand and pushing down energy prices. Each warm day increases the opportunity for the region to build supplies, delays a drawdown of gas storage, and reduces the risks of blackouts and rationing.

The priority for Europe has been to get through this winter – and to secure more liquified natural gas (LNG) cargoes for future winters. With the recent run of milder temperatures, that initial goal appears increasingly within reach, And Europe is looking more and more like an attractive place to invest



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