LONDON—One of the first closely watched seasonal outlooks for what the European winter holds sees colder and drier weather than usual across the U.K. and Northern Europe, conditions that could add pressure on governments and companies managing the continent’s supply of natural gas.
The U.K. Meteorological Office on Monday said there was an increased likelihood of the next three months being colder than normal with average temperatures likely to sit between four and just-below six degrees Celsius, equivalent to between 39.2 and 42.8 degrees Fahrenheit, in the U.K., which is slightly below the average seen over the last five years. The forecasting agency added that it was also likely to be drier than normal, with lower chances of heavy rainfall between November and January.
No single forecast is definitive and so-called seasonal outlooks like the one provided by the U.K. come with caveats. They aren’t as precise as the one- to five-day forecasts that weather services can make with relative accuracy. Forecasters, including the Met Office, say the science around such long-range forecasting is still emerging.
Still, as an early look, “this all suggests that heating related gas demand will be up this winter,” said Caroline Bain, chief commodities economist at Capital Economics. “People are not going to switch off the heating if they are cold, and so we’re likely to get sustained heating-related demand.”
The Met Office’s forecast is specific to the U.K., but the 168-year-old agency’s predictions have implications for the continent as a whole, in part owing to its expertise in modeling the North Atlantic Oscillation, an important factor for predicting weather across Europe.
The update issued Monday also comes at a time of year when some of the weather trends that can make a difference in the severity of the winter start to settle down. That can make it easier to predict longer-term scenarios for the entire season.
Gas prices extended recent declines on Monday, driven lower by the large supplies of fuel that Europe has accumulated throughout the year. Benchmark wholesale prices for gas in the Netherlands fell 9% to about 127 euros, or $126, a megawatt-hour. U.K. prices fell 7% to 3.14 pounds, or $3.62, per therm.
Futures contracts suggest gas will become more expensive when temperatures fall over winter but that prices won’t regain the highs recorded in August. One reason is that recent warm weather has delayed the date at which Europe dips into its storage, so will be more gas to heat homes if a late cold snap strikes.
The Met Office’s outlook, along with a handful of others expected this month, are being more closely followed than usual this year. In the wake of Russia’s invasion of Ukraine, Europe has tried to pivot away from its reliance on Russian gas. Moscow, meanwhile, has largely turned off the tap, in retaliation for Western sanctions.
That has set off a scramble in recent months by governments and utilities to take gas from other sources and encourage residents and businesses to conserve the fuel. Companies across the continent have shut down production amid super high prices and calls to save gas. European countries have also rushed to buy shipped gas, called liquefied natural gas, from places such as the U.S. and Qatar.
All those moves have swollen European gas-storage facilities. More gas waiting on LNG tankers idling off the coast. Gas prices have fallen sharply since the summer amid the glut.
Whether the stored gas will be sufficient to get Europe through the winter depends on how cold and windy the season is. Governments are hoping for a mild, wet winter, which can also bring higher wind. That could help boost wind-power generation.
Natural-gas prices have been falling in recent weeks on lower demand, with European stores of gas rising to roughly 94% of total capacity. That is thanks in part to the very mild temperatures seen across the continent during the fall.
Ms. Bain said that European gas markets have seen significant demand reduction from industry, with output of metals, fertilizers and other key sectors all being slashed to help stem the issues coming from gas cuts from Russia, easing prices.
However, a lack of wind and rainfall is likely to push gas demand and prices higher—on top of the colder conditions—given renewable energy sources may not be as readily available, according to analysts.
Capital Economics is currently forecasting European benchmark prices to hit €150 a MWh by the end of the year. This remains well below the highs seen this year when prices reached €349.90 a MWh in late August.
—Joe Wallace contributed to this article.
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