Market outlook September 2024
What was going on? It seemed as if all the bears were on vacation at the height of summer and the bulls had taken over the commodity markets. An astonishing price rally - there was no sign of a summer slump. In the meantime, however, calm has returned.
September 2024
From July 23, the upward movement on the electricity market for the base 2025 started at EUR 86.05/MWh and ended at EUR 101.60/MWh on August 12. In purely fundamental terms, this rally was puzzling. Well-filled gas storage facilities, no cooling water restrictions - particularly in France, where this has often been an issue in recent years - and no transport problems for coal due to low river levels.
Rising prices due to the situation in the Middle East
In purely fundamental terms, there was hardly any basis for rising prices. Nevertheless, they rose. The reason was risk premiums. In the gas market in particular, the geopolitical environment fueled fears of an escalation of conflict in the Middle East - and prices rose as a result. Other commodities such as electricity and emission allowances (European Union Allowances EUA) followed suit.
Highs in renewables calm the market
However, the bulls lost steam from August 12. The attempt to reach new highs failed at Base 2025, and the markets started to slide back down bit by bit from August 20 at the latest. One reason was certainly solar and wind: August was a record month for renewables and net electricity generation from fossil fuel power plants was only 27.6%. This put pressure on gas, coal and EUA prices.
The military conflict in the Middle East does not yet appear to be turning into the feared conflagration, meaning that the associated supply fears on the gas market are diminishing and causing the risk premium to melt. Even the current concerns that the transit agreement for Russian gas through Ukraine to the EU will not be extended at the end of the year have not prevented the gas price, THE 2025, from falling again by around EUR 5 to EUR 38.37/MWh since August 19.
Outlook
The markets' targets could be roughly the same as at the start of the rally: in our view, it is around EUR 86/MWh for the 2025 electricity base, around EUR 65/MWh for EUA prices, around EUR 37/MWh for THE 2025 gas and around USD 110/tonne for the API2 2025 coal contract.
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