Market Outlook June 2024

Looking back over the past three months, a steady rise in the electricity price for the base front year 2025 has been observed since the end of February 2024: While the price level was still at EUR 67.60/MWh at the end of February, it traded at EUR 102.9/MWh in May 2024, reaching its temporary peak. This corresponds to an increase of 80% in the three months. If we look at the prices of commodities that influence the electricity price, such as gas, EUA and coal, the explanation is easy: for all of these products, just like the electricity market, the annual low was at the end of February and the peak was reached at the end of May. The market is currently correcting and the annual product has lost another 10 EUR/MWh within a week. The outlook is neutral to slightly bearish.

Gas prices react more sensitively

The annual low for THE-Gas annual product 2025 was around EUR 30/MWh. This means that the gas market has also clearly moved away from the high level of EUR 120/MWh seen in late summer 2022, but cannot match the low prices seen before the start of the war in Ukraine, when the annual product was around EUR 20/MWh. The gas market is more susceptible to short-term influences due to the significant changes in gas supply structures, in particular the loss of pipeline gas from Russia and the replacement of these volumes with LNG. In particular, the latest reports on the possible termination of gas supplies to Austria from Russia, combined with the impending ban on Russian LNG, have supported prices in recent weeks. However, even with the shortfalls and restrictions in gas supplies from Norway at the beginning of June, the bulls were unable to maintain the upper hand on the gas market. Due to the seasonally low demand, high storage levels and a currently highly diversified gas supply, the market is proving robust in the face of new extreme price peaks. Overall, the bullish trend since the end of February appears to have come to an end. The outlook is neutral.

Neutral outlook for emission allowances

Like electricity and gas prices, European Union Allowances (EUAs) corrected downwards at the beginning of June. According to industry reports, the amount of short positions has decreased significantly, indicating the expectation that prices will not fall any further. The EU Commission's decision to remove only 266.8 million certificates from the market and transfer them to the market stability reserve may have weighed heavily. The market had expected a larger quantity and turned negative after the decision. There is room for a correction, as the low for the year was EUR 51.13 per tonne, 30 percent below the current level of EUR 72 per tonne. The high for the year was 78.02 EUR/t in May. The outlook is neutral to slightly bearish.

Coal correlates with other commodities

The price of the coal product API2 2025 correlated with electricity, gas and EUA prices and also rose initially. While the product was still trading below EUR 90/t at the end of February, by the beginning of June it had already risen to EUR 130/t, a whopping increase of 44%. There are doubts that the strength is coming from the coal market itself and this rally is also difficult to explain from a fundamental perspective. Sufficient stockpiles and a decline in European coal-fired power generation tend to point to moderate prices. There have recently been interruptions in coal production in South Africa and speculation that Poland could significantly increase its coal-fired power generation in order to export electricity to Ukraine. Nevertheless, the reason for the price increase is more likely to be that the price of coal has followed the other commodities.

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