5.3 C
December 7, 2022

Europe hoping that a warmer winter could help with the energy crisis

Macro commentary by eToro analyst for Romania, Bogdan Maioreanu

 The approaching winter raises a lot of questions to the population and governments in Europe about how long the energy stocks will last. While the gas storage facilities are filled above last years’ averages and are close to full, forecasts for a warmer winter mean that weather could lend a helping hand to Europe in surviving the energy crisis.

Preparing for the winter most countries are having their gas storage filled over the 80% capacity threshold with the exception of Latvia. Bruegel think-tank estimates that EU natural gas demand (which does not include storage filling) has declined 7% compared to the average from the period 2019 to 2021. Demand in August 2022 was 23% down. Most of this reduction was driven by industry, as households do not consume much gas in September and gas reductions were not apparent in the power sector.

The latest data from Romania is showing that the natural gas production in the first eight months of this year is at 95% of the previous year production and the imports are down to 80% of the previous imported quantities. We have increases in coal production and imports, and in imports of crude oil and electricity. For electricity, the data is showing also a 5% decrease in consumption but a 2% increase in exports.

According to an analysis, Europe is decreasing natural gas consumption but not equally. Germany is showing a decrease of 3% for the households and 7% for the industry in the first nine months of this year compared with the average in the 2019-21 period. Romania is having a 2% decrease in households and 10% in industry but a 2% increase in power generation. There are countries that despite the issues with the natural gas supply are seeing an increase in consumption like Croatia and Slovakia.

Somehow the weather has been helping Europe so far and the estimates are that this situation will continue. For the winter, scientists at the Copernicus Climate Change Service C3S are forecasting that there’s a 50%-60% probability for the UK, much of the Mediterranean coast and parts of central Europe and 40-50% for Romania that we will see well-above-average temperatures between December and February. If it materializes it is possible to see a calming of the demand for gas and heating fuel in the months to come, leaving more available for the industry. According to the eToro Retail Investor Beat Survey, Romanian investors are most worried about a potential recession and rising inflation. Any good news from the energy markets may ease these fears.

The good forecast is coming after a colder than usual September with European-average temperature nearly 0.4°C below the 1991-2020, but is following the hottest summer on record in Europe. In June, July and August, the average surface air temperature over the continent was 0.4°C above the record set by the summer of 2021.


Bogdan Maioreanu, eToro analyst and markets commentator, has over 20 years of experience in financial services and investments and a strong background in journalism. He held different Corporate Banking management positions in both Raiffeisen Bank and OTP Bank, before moving to business consultancy roles working for IBM Romania among others. Bogdan is an Executive MBA from Asebuss and Washington University.

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