Switch to the Axpo Group website.

Go to Axpo Group website.

12.09.2023 | European Energy Markets Monthly, September 2023

Markets shift towards bearish conditions

European energy markets left the summer season with a bearish fundamental sentiment continuing to ease security of supply concerns.

Gas inventories rose strongly, reaching the highest recorded levels for this time of year, while coal stocks remained close to the five-year average. Hydro storage was another important bearish driver, with heavy precipitation at the end of August improving hydro balances across Europe. In the Nordic region, extreme rainfall delivered record negative spot prices and led to a steep recovery of Norwegian hydro stocks. Some even exceeded their maximum capacity, improving the possibility of higher exports to mainland Europe in the coming winter. Meanwhile, several French nuclear reactors long offline due to corrosion issues were brought back to market. This lifted the year-on-year nuclear production surplus significantly, eroding the enormous risk premium on French winter power contracts which plunged by more than 100 EUR/MWh during the previous two months.

Despite the above bearish developments, however, supply risks emerged in August and once again tested the resilience of European energy markets. The prospect of possible strike action at Australian LNG export facilities triggered supply uncertainty in the global gas market, given that a full blown strike could cut around 7% of global LNG supply, and significantly increased European gas contracts during the first half of August. Europe rarely imports Australian LNG but Asian buyers would need to buy replacement volumes, prompting increased competition between Asia and Europe. Although the possibility of industrial action still looms (at the time of writing), its impact on European gas balances would be limited given ample gas inventories. In addition, annual maintenance and outages affecting Norwegian pipeline flows limited European gas supply and supported supply risks, which so far have been absorbed comfortably by European gas storage.

On the coal side, strong imports from China and reduced export volumes from Colombia tightened global supply. However, their bullish effect was alleviated by higher exports from Indonesia and Australia. In addition, competitive gas prices, improving nuclear supply, and persistent demand destruction limited coal consumption, leaving little room for significant coal price increases. All the above bearish developments, meanwhile, kept EUA prices oscillating within the 85-90 EUR/t price corridor for most of the time, although the seasonal reduction of auction volumes in August was also a supportive but short-lived factor. Moving into September, markets wait to see whether near-maximum European gas inventories provide incentives for further market adjustments, such as increased uptake of Ukrainian storage, or gas prices collapse in light of declining injection capacity. Meanwhile, an upside price risk is looming on the back of possibly prolonged LNG strike action in Australia and the seasonal hurricane threat in the US Gulf.



This document is for information purposes only. None of the statements and notes constitutes a solicitation, an offer or a recommendation for conducting any transactions. No warranty, either expressed or implied, is given for the information contained in this document. Actions based on this document made therein are the responsibility of those who undertake them. All liability for damages, which may result directly or indirectly from the use of this document, is disclaimed.


The accuracy, completeness or relevance of the information which has been drawn from external sources is not guaranteed although it is drawn from sources reasonably believed to be reliable. Estimates regarding future developments and other forward looking statements regarding commodities and therewith connected derivatives mentioned in this document may be based on assumptions that may not be realized. Axpo reserves the right to change the views reflected in the document without notice and to issue other reports that are inconsistent and reach different conclusions from the information presented in this document.


More articles for you

Show all


Hydrone propels pilot expertise sky-high

Aerial efficiency: monitoring power plants and the grid using drones

Read more

Energy market

Weather and politics strong drivers of energy markets

European Energy Markets Monthly, July 2024

Read more


Pigniu reservoir: the first-ever removal of deposited sediments via flushing

The Pigniu reservoir of Kraftwerke Ilanz AG was temporarily completely emptied

Read more

Energy regulations

Additional regulation for electricity companies with ‘systemic importance’?

In the wake of the energy crisis, the Federal Council has presented a draft for the regulation of electricity companies with ‘systemic importance.’

Read more