Energy Transition : Navigating Change and Stability

E-world, Europe's largest energy trade fair, will bring together over 900 stakeholders from the energy and water sectors in Essen from February 11 to 13. Join us at our stand in Hall 2 - 2D100 during this event to connect with our experts, who are ready to share their market assessment and answer your questions about the evolving energy landscape. 

This is also an opportunity to gain insights from our dedicated Energy Research, featuring special reports from Joel Hancock, Commodities Research Analyst and a 15-minute video by Natixis CIB Research.

Yes indeed, with Title Transfer Facility (TTF) above €50/MWh European gas prices are at a multi-year high, and with European Union Allowances (EUAs) also pricing strongly at €80/tonne. Ultimately, concern on next summer’s storage refill is driving higher TTF values for 2025, with inventories drawn down sharply so far this winter. Slightly colder temperatures and looser behavioural consumption reductions have seen inflexible demand increase this winter, whilst heavy coal retirements in recent years have limited the capacity to switch gas out of the power mix.

Concern on the ability to refill gas storage has been exacerbated by the European Commission’s mandatory storage targets for the end of the injection season, with very strong, price-insensitive injection demand forecast for summer 2025.

As such, prices will need to be at least as high as domestic and international demand destruction triggers to ensure as much gas can flow into storage as possible.

Our fundamental modelling suggests a comfortable EUA balance in 2025, with slight additions to surplus. Tightness will only emerge in 2026, when changes to free allocation for industrials following benchmark changes will be driving a significant deficit.

In our view, the year-to-date rally reflects speculative market participants pre-positioning for this forward tightness, with long speculative exposure to carbon markets in € terms at a record in the most recent data.

We think industrial market participants will stay out of the market in 2025, given uncertainty on both the operating and regulatory environment, and see long positions, and therefore EUA prices, as vulnerable.

The new Trump administration continues to trigger volatility, with the potential for tariffs levied on the EU harming the demand side of the European energy complex.

Additionally, the ongoing Russia-Ukraine conflict and subsequent loss of Russia’s energy flows from Europe’s balance continues to impact the supply side of the European gas market, with any indication of progress towards ceasefire negotiations likely to trigger substantial market volatility.