(Bloomberg) — Europe and East Asia are set to be hit by cold snaps next week, in an early test of energy markets rattled by high prices and competition for liquefied natural gas cargoes.
Average temperatures across a swath of continental Europe are set to sink 2C to 3C below normal from the weekend. At the same time, a cold wave is forecast to sweep across northeastern China, Japan and South Korea, pulling average temperatures 5C below the norm in some regions.
The overlapping cold spells are set to be brief, but provide an early-season stress test of power and energy markets. While a powerful El Niño is expected to spur a mild Northern Hemisphere winter overall, it also shows how even fleeting cold snaps can jolt prices.
On Monday, European benchmark gas futures topped €97 per megawatt-hour for the first time since the 2022 energy crisis, while the region’s gas storages stand at just 75% full compared with a seasonal norm of 90%.
What markets likely fear the most going into winter is “joint cold across multiple high-energy-demand regions,” said Andrew Pedrini, a meteorologist at Atmospheric G2.
The European cool-down is forecast to start mid-week in France and Germany, according to models from the European Centre for Medium-Range Weather Forecasts and analysis from government and commercial forecasters. Conditions across the Mediterranean and Balkans were already unseasonably cold.
Temperatures in Paris are forecast to fall 2.7C below normal on Saturday, with lows reaching 4C, ECMWF data show. Munich will be just above freezing.
Wind generation is forecast to start falling midweek across northwest Europe, according to MetDesk weather models and analysis, which show a lull in output lingering through next week.
The largest anomalies in Asia are forecast for northern China and northern Japan, where average temperatures are set to fall more than 5C below seasonal averages, according to Takahisa Nishikawa, a meteorologist at Atmospheric G2. Widespread snowfall expected in northern China could raise heating demand while crimping solar power output, he added.
“Although these cold surges are expected to be relatively brief, they could provide an early test of energy demand across East Asia,” he said.
The cold snap comes when coal prices in China are at a three-year high after a deadly accident in May slowed mining output in the key province of Shanxi. Still, China’s power sector has largely benefited from the weather this year, as residential electricity demand sees a rare year-to-date decline through September after rain and typhoons slashed summer air conditioning demand, according to the National Energy Administration.
The coming cold snap will be driven by a high-pressure system sitting over the Ural Mountains, which causes the jet stream to dip south, allowing frigid air to flow into East Asia.
While the El Niño that’s building toward record strength is expected to contribute to a relatively mild Asian winter, the risk of severe and short-lived cold blasts remains, Nishikawa said. He pointed to the development of a strong El Niño in 2023-24, during which Japan saw multiple bouts of anomalously cold temperatures.
–With assistance from Dan Murtaugh.
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