This article is a part of Energy Recap - our monthly deep dive into the energy market. Get articles and analyses from our market experts on the most interesting agendas, key events shaping the current prices, and forecasts for the month to come.
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November brought new price drops on the European gas market. Conversely, the carbon allowance market surged, and markets are generally experiencing heightened volatility as the year draws to a close.
Unsurprisingly, weather forecasts proved crucial to developments in the Nordic electricity market in November, with several shifts in forecasts leading to dramatic fluctuations in the futures curve. In early November, forecasts were cold, dry and windless, leading to an upward trend in system futures in the first half of the month. However, once this cold snap ended, the character of the market changed radically. As forecasts began to point to milder December weather, and that outlook steadily firmed, prices fell sharply.
When the market closed on Tuesday 2 December, the system future for the next quarter, Q1-26, cost 58.08 EUR/MWh, while the 2026 future is 39.55 EUR/MWh. For both contracts, this is the lowest level since July, and highlights the market's state of calm in the run-up to the holidays. Equally, the much-feared Dunkelflaute and the worry of starting 2026 with a large hydrological deficit are not currently a major concern.
The mild start to the winter has also affected the rest of Northern Europe, triggering a drop in both gas prices and electricity futures across most of Europe. All nervousness in the gas market has disappeared, and the fact that gas prices are currently at their lowest level in eighteen months is naturally rubbing off on the gas-dependent German electricity market in particular. The expectation is that Europe will also come through this winter unscathed, and that solid LNG imports from the US in particular will be able to replace Russian pipeline gas as early as next year. On the other hand, prices have skyrocketed in the carbon market, which traditionally has a certain correlation with gas. That said, this is not currently the case, raising the question of how long the two markets can remain decoupled.
