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.
Sign up for Energy Recap
Another dramatic month in hopeful markets
September delivered another month of significant volatility across European and Nordic energy markets. While gas prices eased towards the end of the month, the underlying risks remain unchanged. A weak Nordic hydro balance, geopolitical uncertainty surrounding the Strait of Hormuz, and growing concerns about winter supply continue to create upwards pressure on electricity prices.
For energy-intensive businesses, the coming months could bring both substantial price fluctuations and periods of exceptionally high prices.
The energy market
The Nordic energy market enters the winter season in a fundamentally weaker position than normal.
Hydrological conditions deteriorated throughout September, and the Nordic hydro balance deficit is expected to reach approximately -17 TWh. At the same time, electricity markets remain highly influenced by developments in continental Europe, particularly Germany, where prices continue to rise.
Adding to the uncertainty, European gas storage levels remain significantly below last year's levels, while the ongoing situation around the Strait of Hormuz continues to create a substantial risk across energy markets.
Key market developments
Nordic hydro balance expected at -17 TWh
Nordic Q-27 futures increased by 20% during September
German 2027 contract rose almost 10% month-on-month
European gas storage around 70% full, compared to 82% at the same time last year
Brent oil prices reached their highest level in four months
The challenge
Winter uncertainty is making the market nervousness
Although October weather forecasts currently indicate relatively mild temperatures, the market remains focused on winter risks.
A combination of lower hydro reserves, uncertainty in the gas market, and the possibility of prolonged periods of low wind and solar production ("Dunkelflaute") could lead to significant price spikes across Europe and the Nordics.
The market already experienced this in September, where hourly prices exceeded 700 EU/MWh in several Nordic regions during periods of limited renewable generation.
What you should be aware of
Electricity prices are likely to remain high volatile.
Nordic prices are increasingly correlated with Germany.
Weather forecasts can move the market significantly from one week to the next.
Nuclear production availability will play a critical role during the winter months.
Further geopolitical developments could quickly push gas and power prices higher again.
The Solution
Stay ahead of market movements
In a market characterised by increasing uncertainty and volatility, access to market insights and a proactive sourcing strategy becomes more important than ever.
What should businesses be aware of?
Weather and hydro developments
Gas market movements
Nuclear generation availability
German energy market trends
Geopolitical developments affecting energy supply
By staying informed and continuously evaluating sourcing opportunities, companies can be better prepared for the significant price movements that may characterize the coming winter season.
Conclusion
The market correction seen in gas prices during late September has provided temporary relief, but the fundamental challenges remain unchanged. The Nordics are approaching winter with a substantial hydrological deficit, while geopolitical tensions continue to influence European energy markets.
With weather uncertainty, potential Dunkelflaute events, and continued exposure to developments in Germany and the gas market, there is every reason to expect another period of elevated volatility and potentially record-high power prices during the months ahead.
Our recommendation
Monitor the market closely and maintain a proactive energy procurement strategy. The coming winter is likely to be shaped by rapid market movements, making timely decisions and updated market insights more valuable than ever.
