Energy market analysis Dec. 17, 2025

Oil trading giant: ‘super glut’ due to sharp increase in supply

“Whether it’s a surplus or a super surplus, it’s hard to escape it.“- Saad Rahim, chief economist Trafigura

According to Saad Rahim, chief economist at Trafigura, the oil market faces a “super glut” in 2026 as a sharp increase in supply coincides with a slowing global economy. New drilling projects and slowing demand growth will put further pressure on already low oil prices.

Brent crude is down 16% this year and is on course for its worst year since 2020. Large projects in Brazil and Guyana are coming online next year, further increasing supply. Banks such as Citi and Goldman Sachs have long embraced this oversupply theory. Goldman analyst Daan Struyven recently reported that global apparent oil inventories have increased by nearly 2 million barrels per day in 30 days and expects further growth.

Demand from China, the world’s largest oil importer, is expected to slow due to the surge in electric vehicles. China has bought additional oil this year to replenish strategic reserves, but Rahim warns, “China must continue to buy at this rate to prevent the super glut from becoming apparent even sooner.”

America is also betting on higher production. President Trump has announced continued “drill, baby, drill” stimulus. There is speculation about replenishing U.S. strategic reserves. However, that would actually raise prices and remains off the table for now.

Ben Luckock, head of oil trading at Trafigura, earlier predicted that oil prices could temporarily fall below $60 a barrel: “I expect us to get into the $50 range around Christmas and New Year.”

Trafigura, one of the largest global commodity trading companies, reported a net profit of $2.7 billion in the fiscal year to September. That is down slightly from $2.8 billion last year and the lowest level in five years. The decline comes after years of high profits during Russia’s invasion of Ukraine. The nonferrous metals division posted a record year, partly because of profitable copper deliveries to the Americas. CEO Richard Holtum stressed that “significant headline-driven volatility” remains a key market trend and will continue into 2026.

Oil prices are still in a downward trend. The low of the February 2026 contract was at $47.50 in March 2020. The current bear market can be seen as a correction of the rise from this low to the peak of $80 in the contract below. The price extremes of the next delivery month were between $20 and $130 per barrel. At the time of those extremes, the contract below was much further away in time on the forward curve. There the volatility is a lot lower.

Price Crude oil – Brent February 2026 ($/barrel) – day cloud candle, log scale

Europe’s energy transition: impact on electricity prices and industry

“Average electricity prices for heavy industries in the European Union remain about twice as high as in America and 50% higher than in China.”- Wall Street Journal

Europe has opted for a rapid rollout of wind and solar energy, resulting in a reduction ofCO₂emissions of about 30% since 2005. However, these environmental gains have been accompanied by structurally higher electricity prices and a weakened competitive position of energy-intensive industries.

According to the International Energy Agency (IEA), Germany now has the highest household electricity prices in the developed world, while Britain has the highest industrial rates. On average, electricity prices for heavy industry in the EU are about twice as high as in America and 50% above the level in China.

The combination of high costs and limited grid capacity hinders investment in data centers and AI infrastructure. In some cases, companies have to wait years for additional connection capacity. Examples include chemical plant closures in Germany (Ineos) and Scotland (ExxonMobil), with companies explicitly citing unfavorable energy prices and green policy pressures.

Dependence on weather-dependent sources increases volatility. Windless or cloudy periods require countries to import expensive power, causing price increases. At the same time, subsidies and taxes continue to mask the true cost of renewable energy.

America is pursuing an “and” strategy: expanding renewable energy alongside maintaining nuclear and fossil capacity. Recently, America is investing nearly $1 billion in advanced nuclear reactors, including Small Modular Reactors (SMR) projects in Tennessee and Michigan, to be put on the grid starting in the 2030s.

Conclusion: Europe’s energy transition has led to lower emissions, but also to structurally higher electricity prices, reduced industrial competitiveness and bottlenecks in grid capacity. Without fundamental policy adjustments, Europe risks remaining excluded from capital-intensive sectors such as data centers and AI.

The price of electricity is being pushed down by the falling price of input costs such as gas and coal.

Price Baseload Electricity supply year 2026 (eur/MWh) – week cloud candle, log scale

Price spike due to extreme cold in America

“Make global warming great again…”

US natural gas futures rose about 7% recently, reaching the highest level in less than three years. This increase is due to an announced cold snap in the eastern US, which will continue until mid-month.

The price rose from $2.70 per MMBtu in August to $5.41 per MMBtu, a doubling and the highest level since December 2022. With this, the market is pricing in the risk of an early intense cold snap due to a possible polar vortex, or polar swirl.

The quarterly change, meanwhile, is +62.5%, the strongest increase since Q4 2005.

After this peak, the Henry Hub price fell sharply.

The price spike in America is weather-dependent and temporary in nature.

European gas prices continue to decline structurally, despite occasional volatility. Current stability comes from good supplies and LNG supply and milder temperatures. In colder weather, spot LNG remains crucial to avoid shortages.

Price TTF gas supply year 2026 (eur/MWh) – day cloud candle, log scale

India extends coal expansion to 2048 despite climate targets

“China … dominates much of the supply chain for batteries and solar panels.” – Bloomberg

India is considering a significant expansion of coal capacity that could continue until 2047. A marked departure from earlier projections in which the peak was expected around 2035. These plans stem from talks between the Ministry of Energy and think tank NITI Aayog, These plans are in line with Prime Minister Modi’s ambition to make India energy independent and classified as a developed economy by 2047.

With domestic coal reserves expected to last a century, the government sees coal as the most reliable option to support this goal. Total capacity could reach 420 GW by 2047, an increase of about 87% over current levels.

Although India is also committed to renewable energy and battery storage, dependence on vulnerable supply chains remains a risk. Bloomberg stresses that China has a dominant position in battery and solar panel production. Some planned coal plants will operate flexibly to balance variable renewable generation.

This expansion complicates India’s climate goals. According to NITI Aayog, emissions must peak by 2045 at the latest to reach net zero by 2070. India, currently the third largest emitter worldwide, has not yet submitted an updated reduction strategy for 2035 under the Paris Agreement. The country argues that richer countries should bear a larger share of decarbonization.

India chooses energy security over rapid decarbonization. Planned coal expansion offers stability but increases tension between economic growth and climate commitments.

Price ICE Coal delivery year 2026 (USD/t) – week cloud candle, log scale

Emission rights and industry: America benefits, Europe loses competitiveness

“Europe’s approach to climate neutrality has clearly damaged the competitiveness of energy-intensive industries.” – Daniel Lacalle

American manufacturing is growing, while European industries are shrinking under the pressure of aggressive climate and energy policies. According to the latest S&P Global/HCOB PMI figures, U.S. manufacturing is in a phase of broad-based expansion, while Germany and France remain stuck in contraction. Britain records only a marginal improvement.

In November 2025, PMI figures show a marked difference between America and Europe. The U.S. manufacturing industry posted a PMI of 51.9. This indicates a phase of expansion and growth. Germany, on the other hand, came in at 48.4, signaling contraction. France also stayed below the 50 mark, signaling continued contraction. Britain scored 50.2, just above the neutral limit, indicating only minimal growth.

The main differences between the two regions are in cost structure and investment dynamics. In America, companies benefit from stable margins, low energy prices and a favorable investment climate, with a lot of capital devoted to reshoring and technological innovation. In contrast is the European situation, where companies face high input costs due to carbon prices, green taxes and rising network costs. These charges weigh on profitability and lead to declining order flows and reluctance to invest.

Specifically in Germany, sectors such as chemicals, metals and glass are cited as examples of industries that are heavily affected. They face expensive electricity and gas, additional climate-related costs and the rapid phase-out of nuclear and fossil energy capacity. This increases pressure on their competitiveness and puts further pressure on investment plans.

In France, industrial companies have benefited from nuclear power. As a result, they have lower energy costs than their German or British competitors. However, they do face high grid costs, environmental taxes and regulatory uncertainty regarding future climate policy, all of which affect long-term investment decisions. British think tanks and strategy agencies point to the same issues. They stress that carbon prices, green taxes and planning barriers have made energy costs structurally higher than in America. This is forcing some producers to relocate or reduce capacity.

America reduced CO₂emissions by about 18% between 2010 and 2024, similar to the EU, but without weakening its industrial base. American policy combines fiscal incentives while preserving low-cost energy options, unlike Europe where high energy prices, complex regulations and climate taxes structurally increase costs.

Europe’s net-zero policy increases the cost differential with America and leads to displacement of investment to North America. Without policy revision, Europe risks losing its industrial competitiveness further.

The emissions market is the only market in this analysis whose price shows an upward trend. This market is strongly influenced by political decision-making: supply and demand are determined not only by market mechanisms, but also by central policies of the European Union, which have a direct impact on price trends.

Price Emission Rights – Dec-25 contract EEX (eur/t) – day cloud candle, log scale

Germany cuts offshore wind capacity after failed auction

“Offshore wind energy is in a difficult market situation, both internationally and in Germany.” –minister of economic affairs Germany

Germany has decided to increase capacity for the offshore wind auction in 2026 will be reduced to 2.5-5 GW. Significantly less than the previously planned 6 GW and well below the 10 GW offered in August. The reason is the failed August auction, in which no bids were submitted for projects without subsidies.

The Federal Network Agency confirmed that the auction for 10.1 GW in the German North Sea yielded no bids. Industry association BWO and other sector parties are calling for a fundamental review of the auction model, including more certainty about revenues and planning.

The failure reflects developers’ reluctance to take risks on projects without grants, especially given rising costs and supply chain bottlenecks. The German government responded with a legislative amendment that not only reduces auction capacity, but also aims to speed up licensing procedures and grid expansions.

The offshore wind sector is under pressure internationally due to rising costs and limited supply capacity. In Germany, expansion stalled in the first half of 2025, while the goal of 70 GW of offshore capacity by 2045 remains far off. Policymakers need to revise the auction model to make investment more attractive.

Without structural changes in policy, Germany risks failing to meet its ambitious offshore wind goals. The current market demands greater financial security and a stable investment climate.

Developments indispensable critical minerals

Lithium: demand increase from energy storage on grids

Analysts at Goldman Sachs, UBS, Citigroup and Bernstein expect a surge in demand for lithium from 2026 to 2028. The main driver is no longer exclusively electric transportation, but large-scale energy storage systems for power grids. UBS predicts that prices during this period could rise up to 150% from previous levels.

Goldman Sachs confirms this trend and points to the role of grid batteries as a key factor in future demand. Tesla also emphasizes that large-scale battery storage can significantly increase the available supply of electricity in the US.

Lithium thus benefits from structural demand growth due to energy transition and digitalization, with a strong price outlook for the coming years.

Copper: record prices due to demand for infrastructure and AI

Copper futures on the London Metal Exchange reached a new record of $11,575 per ton in December 2025, driven by a combination of higher demand from Asia, stockpiling in the Americas and speculation about possible import tariffs. Goldman Sachs calls copper the “preferred industrial metal” for 2026, with an average price forecast of $10,710 per ton in the first half of the year.

Structural demand comes primarily from investments in power grids, AI data centers and defense. Although analysts warn that the current parabolic rise is not sustainable, the long-term outlook remains positive due to limited mining capacity and increasing electrification.

In short, copper is a strategic metal with strong demand fundamentals, despite short-term volatility.