European Electricity Prices Are Likely To Soon Drop

Overall, the European electricity futures prices are still bullish. However, the underlying factors that feed into this price suggest that it is peaking and could decline from here.

2025 Electricity price may be peaking. Price decline may be imminent.

A number of factors suggest that electricity prices may be done going up.

Factors of Note:

• USA natural gas prices have had their first meaningful dip since October 2024. The USA is a major supplier of natural gas to Europe, and natural gas is a leading cost driver in the calculation of European electricity prices.
• Russian natural gas prices have had their first meaningful dip since October 2024. Russia is a leading supplier of natural gas to Europe.
• The European gas prices are going up even though the sourced gas is currently dropping because the gas processed into LNG that’s then sold to Europe continues to be marked up without pause in hikes. Europe is charged a premium for LNG. LNG prices are likely to follow the downward trend of their large Russian and USA suppliers.
• European carbon credit prices are increasing, sustaining electricity price rises. However, this is not a large enough factor to sustain price rise on its own, and capital seems to have begun flowing out of it. Its price should be watched closely over the next couple of weeks.
• We’re in the midst of winter, and remaining stores of natural gas are now predictable. There’s not much uncertainty or concern that energy supplies will be lacking. As spring draws near, prices historically fall with demand. This puts further downward pressure on near-term electricity prices.
• Capital seems slowly to be flowing out of TTF natural gas price futures. The price’s standard deviation is significantly above mean while capital flow is slackening, so it’s possible price has a sudden correction from here.

Conclusion: Warning that we are increasingly likely to experience a correction in European electricity prices.

Previous near-term peak natural gas price forecasts circled in green. Current alert circled in red.