Winter is coming, with weather sensitivity set to rise

The European energy complex delivered a mixed performance in October. Gas prices slipped, EUAs and coal strengthened, and power prices struggled to establish a clear direction amid shifting fundamentals.

As winter approaches, the market remains particularly sensitive to cold and windless conditions, reflecting both the growing share of intermittent renewables in Europe’s energy mix and the limited structural flexibility of the region’s gas sector. Meanwhile, the French nuclear fleet continued to perform strongly, weighing on electricity prices and prompting EDF to raise its 2025 production target to a new range of 365-375 TWh. And in Spain, the operator of two nuclear power units originally scheduled for closure in 2027 and 2028 requested a lifetime extension until 2030.

During the past month, temperatures hovered around seasonal norms in Western and Central Europe, remained milder across the Nordics, and were colder than average in Southeastern Europe. Overall, this pattern led to a modest year-on-year increase in European power demand. Meanwhile, reports that Norway’s aluminium industry is ramping up production toward pre-Ukraine war levels offered a tentative sign of economic recovery. Similarly, German power demand rose to its highest October level since 2021, supporting a cautiously optimistic economic outlook and reflecting progress in electrification.

Influencing the outlook for further electrification, the German Federal Ministry of Transport recently released its 2030 Charging Infrastructure Master Plan, aimed at accelerating investment in charging infrastructure and promoting the wider adoption of electric vehicles. At the same time, in early November the German coalition government approved an industrial power price scheme to support the country’s struggling industrial sector, which remains under pressure from global competition and high electricity costs. Under the scheme, announced alongside tax cuts and grid fee support – although these measures cannot be combined – eligible companies may have up to half of the average wholesale electricity price covered for as much as 50 per cent of their annual demand, in return for investments that improve energy efficiency and sustainability.

On the fuels side, Europe continued to receive strong LNG inflows as the US ramped up exports, Qatar delayed maintenance, and Asian spot demand remained weak. This weighed on gas prices, even as colder and less windy weather tightened October balances to their lowest in nearly a decade, leaving EU storage at around 83 per cent, the lowest November level since the onset of the energy crisis. Coal prices turned more volatile and edged higher amid tightening fundamentals in China. A similar trend emerged in the carbon market, where funds added net length to their already sizeable positions, pushing early November prices above the technical resistance level of EUR 80/t.

Looking ahead, we will continue to closely monitor policy discussions in Brussels on the 2040 climate targets, along with ongoing weather developments and LNG sendouts to Europe. Last, but not least, we will watch for further clarity on the outcomes of the Trump–Xi meeting in South Korea last month, as discrepancies between the two sides’ statements suggest that key details of the summit’s outcomes remain unresolved. 

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