16.01.2024 | European Energy Markets Monthly, January 2024

Bearish 2023 looks set to continue

The close of 2023 saw European energy markets navigating a fragile landscape, characterised by a series of bearish fundamental drivers. These included mild and windy weather conditions, recovering French nuclear production, weak macroeconomic conditions, and demand destruction. Interestingly, the very same fundamental factors, just a year ago, played a pivotal role in one of the most severe energy crunches witnessed in Europe during recent decades. One striking illustration of rapid market developments is the notable transformation of France, shifting from a net power importer in 2022 – a situation last seen more than 40 years ago – to a net exporter in 2023. Meanwhile, Germany became a net energy importer for the first time in 17 years. Against the backdrop of these bearish fundamental drivers and ample fuel inventories, energy prices dropped significantly, in some cases falling by more than 55% from 2022 levels. However, it is worth noting that despite these significant reductions, energy prices sustained a relatively high level when compared with pre-2021 levels.

As for most of 2023, the recovery of French nuclear production – a year-on-year increase of 41 TWh – played a pivotal role in capping the upside of power prices and mitigating the risk of a sudden market reversal in the face of adverse weather conditions or fuel supply disruptions. Such events would stress-test the resilience of the European energy system and trigger higher energy prices. However, the prevailing mild and windy weather conditions, coupled with the expansion of renewable capacity, led to a record number of negative power prices being seen across almost the entire continent. Notably, some markets – including the Netherlands, Austria, Germany, and Finland – saw prices hit the technical price floor of minus-500 EUR/MWh. Another pivotal factor was demand destruction which persisted throughout most of 2023 amid weak macroeconomic conditions, despite low price levels. Towards the end of the year, however, demand decline dropped significantly.

Fuel prices also followed a downward trajectory throughout 2023, driven by prolonged warm winter periods globally, robust renewable generation, and subdued industrial demand. The latter factors enabled gas inventories to end last winter at exceptionally high levels, requiring only limited stock building during the summer. Despite challenges in pipeline supply from Norway, gas storage filled early amid strong LNG supply and entered 2024 at the highest ever January level, bolstered by the re-exported gas stored in Ukraine. Against this prevailing bearish market sentiment, the European power sector experienced a significant decline in coal consumption. This reduction not only enabled China and Vietnam to increase their coal imports, but also contributed to a 10 to 12% year-on-year drop in emissions within the EU ETS.

Looking ahead, 2024 promises to be a pivotal year for the rebalancing of European energy markets. Europe faces the challenge of replacing a further loss of Russian gas via Ukraine transit, as the existing agreement expires at the close of 2024. At the same time, the upcoming European Parliament election in June is poised to set short-term market sentiment and long-term fundamentals. Overall, we anticipate lower fuel and carbon prices, a robust expansion of renewable capacity, the closure of thermal capacity, and a mild rebound in energy demand. The dynamic interplay among these factors will not only shape the pace of energy transition and decarbonization. It will also impact the overall security of supply.


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

Energy politics

Shifting majorities: is the centre-left the new centre-right?

EU elections

Read more

Energy market

Growing business: how Axpo is helping French greenhouse farmers

Innovative partnerships in France

Read more

Energy market

Weather and geopolitics shape European energy markets

European Energy Markets Monthly, June 2024

Read more

International business

Gas decarbonisation and hydrogen package

EU internal gas market: More green & low-carbon molecules

Read more