Record winter warmth cuts gas consumption

London: The northern hemisphere has experienced the warmest winter on record, with the unusual warmth concentrated around the Atlantic Basin, which has produced an enormous surplus of gas and slump in prices since October.

Surface temperatures on land were +2.65°C above the 20th century average between December and February, according to data compiled by the U.S. National Oceanic and Atmospheric Administration (NOAA). Record warmth in the winter of 2023/24 beat previous highs of +2.44°C in 2019/2020 and +2.61°C in 2015/16 - also winters characterised by surplus inventories and slump in gas prices.

Global warming, strong El Nino conditions in the Pacific, a strongly positive North Atlantic Oscillation, and the solar activity cycle moving towards its 11-year peak, all contributed to exceptional warmth this winter.


NORTH AMERICA
Europe has received the most attention because of the regional gas market's disruption following Russia's invasion of Ukraine, but the most abnormal weather occurred in North America.

Temperatures across North America were +3.43°C above the long-run average between December and February ("Climate at a glance", National Centers for Environmental Information, March 2024). North America experienced record warm anomalies in both December (+4.66°C) and February (+3.59°C) slashing heating demand for both gas and gas-fired electricity.

U.S. gas inventories started the heating season just 64 billion cubic feet (bcf) (+2% or +0.24 standard deviations) above the prior 10-year seasonal average on Oct. 1.

Inventories were still only 129 bcf (+4% or +0.46 standard deviations) above the 10-year seasonal average at the end of November.

But the surplus had swelled to 307 bcf (+10% or +1.15 standard deviations) by the end of December following a run of abnormally warm weather.

Colder temperatures caused the surplus to narrow temporarily in January, particularly during the very cold spell between Jan. 13 and Jan. 22.

But the surplus ballooned again to 519 bcf (+29% or +1.31 standard deviations) by the end of February as temperatures reverted to well above normal.

With mild weather continuing into March the surplus had bloated to an enormous 606 bcf (+35 or +1.35 standard deviations) by March 8.

US front-month futures prices averaged almost $3.19 per million British thermal units in October, putting them in the 13th percentile for all months since 1993 once inflation is taken into account.

By February average inflation-adjusted prices had fallen to a record low of $1.80 as persistent warmth and the relentless build up of surplus inventories sent the market into a tailspin.

EUROPE AND ASIA
Europe also experienced a very warm winter, with temperatures +2.73°C above the long-run average, making the winter the second warmest on record after 2019/20 (+3.32°C).