Gas has suddenly crashed, down 8% to fall below $6 in US for the first time since June this year.
In Europe, Dutch gas futures have also fallen to €140 from a peak of €350 in August, with a gradual decline since then accelerating recently.
One reason for that might be because EU is now considering a dynamic price cap for gas, but a bigger reason may be because of unexpected mild weather forecasts.
“We see the winter as being warmer than usual,” said Carlo Buontempo, director of the Copernicus Climate Change Service that produces seasonal forecasts for the European Centre for Medium-Range Weather Forecasts (ECMWF).
“Nevertheless there is a still a significant chance of a block situation, which can lead to cold temperatures and low wind over Europe.”
Nothing is certain of course, but for the next few weeks temperatures are expected to be above average.
There may be a cold snap in December, but it looks like even the heavens are favoring Ukraine with US likewise estimated to have a mild winter.
“A mild winter is in the forecast for most of the southeastern US,” AccuWeather says for their winter prediction.
It is very difficult to accurately predict so far ahead, but UK’s Department of Meteorology also agrees we’re in for a mild winter.
According to a six-month seasonal forecast using data and a climate model from the European Commission’s Copernicus Climate Change Service, UK temperatures are predicted to be above average from November to February.
The forecast suggests UK could expect an average temperature of between 5.2°C to 5.7°C when the average minimum temperature in December is usually 1.4°C, while the average maximum temperature is 7°C.
This directly affects gas consumption, with a 0.5°C difference translating to half a billion, and just for UK.
Gas demand therefore is expected to be lower. Combined with gas reserves now being full, so removing demand to just fill the reserves, we’re seeing a fall in gas prices with it anyone’s guess where it might find support.
This may feed into inflation, which is already in a downtrend. That in turn may feed into significantly more political pressure on Fed to slowdown its unprecedented crisis hikes of 0.75% for now months.
Oil however remains a bit of a concern. It is slightly up by 0.75%, with OPEC+’s cuts of two million barrels not coming into effect until next month.
US is trying to soften the blow by releasing oil reserves, in addition to significantly increasing pressure on Saudi Arabia, which remains unmoved.
Oil however mostly affects only transport, creating significant incentives for a faster transition to electric cars, and electric planes which are in development.
For now in addition oil moves have been small, while the gas moves have been big enough for the dollar strength index to fall below 112.
That too has ‘crashed’ on 30 minute candles as there seems to be a direct relationship between the value of the dollar relative to other fiat currencies, and the prices of oil and gas.
With oil unchanged while gas has fallen, there’s less demand for dollars to pay for the gas which is usually denominated in USD, and thus the dollar is weakening a bit.
That weakening feeds into dollar denominated assets, like US stocks and arguably bitcoin which is mostly traded against USD.
Making BTC cheaper for Europeans and the wider world, and so increasing demand at least in as far as it is denominated in USD.
There may of course be other reasons as well. Nasdaq had a pretty horrible week with red and red, almost falling below 10,000, and so a recovery of sorts was due at some point.
Bitcoin, though up, hasn’t moved by much, just 2%, with it stuck in a sideways for now four months.
Yet the plunge in gas prices is a new development and a nice surprise that can feed into wider macro decisions, and therefore may be one significant contributor to the green we’re seeing.
