Energy market analysis Jan. 8, 2025

08-01-2025

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A new African energy revolution is underway.

“The African region is gradually moving away from new coal- and gas-fired power plants: new fossil-fuel capacity has fallen by more than 70 percent over the past decade.”

Africa is seeing an acceleration in energy development, with an increase in both fossil fuel and renewable energy projects. Significant oil and gas discoveries have been made in recent years. However, the continent is also focusing on diversifying its energy mix.

Several countries on the African continent are rapidly expanding their energy industries, helped by several factors. First, many oil and gas giants are investing heavily in untapped fossil fuel regions for more diversification in their portfolios and to produce more “low-carbon” oil. In addition, several high-income countries and multinational energy players are currently investing in Africa’s renewable energy market with hydropower, wind, solar and hydrogen energy projects. A number of African countries are also showing economic growth that supports greater energy security.

The African region is gradually moving away from new coal and gas power plants with new fossil fuel additions down by more than 70% in the past 5 years. However, coal and gas continue to contribute about two-thirds of the continent’s annual electricity production. Also, one-third of fossil fuel capacity is less than 10 years old and largely built before electricity demand increased.

The African Union wants 300 GW of renewable energy online by the end of the decade. That is 4 x the estimated 72 GW of installed capacity in 2024. In 2023, there was record renewable energy investment in Africa of about $15 billion. That’s 2.3% of total investment worldwide. Total renewable energy deployment on the continent was 7.9 GW in 2023.

Renewable energy capacity growth was driven by the development of utility-scale wind, solar and geothermal projects in Egypt, Morocco, Kenya and South Africa. Currently, two-thirds of installed wind and solar is in South Africa, Morocco and Egypt. This suggests the need for more renewable investment in other parts of the region.

The growth of South Africa’s solar energy industry has helped the country overcome its energy crisis and regular electricity outages. The higher investments promise more funding in the renewable energy sector in the coming years, as well as a more diverse energy mix in several African countries.

Crude oil

“Behind the apparent calm in the oil market is a complex interplay of macroeconomic factors that could cause sharp movements at any moment.” – Quasar Elisundia, analyst Pepperstone. The oil market was dominated last year by chronic pessimism among traders about Chinese demand and chronic downplaying of supply disruption risks. As a result, 2024 was a fairly stable year for oil prices Brent crude and West Texas Intermediate.

The focus on China was the main reason behind this yet unusual stability in oil prices. New reports predicting a spike in Chinese oil demand will continue to be published through 2025. The own state-owned oil giants of the world’s largest oil importer support this forecast. China National Petroleum Corporation (CNPC) gives as reasons the adoption of electric cars and the growth of the LNG truck market. Chinese energy company Sinopec recently published a report predicting that oil demand growth in China will peak before the end of 2027.

The direction of the market in the coming months will be determined by macroeconomic data and future OPEC+ decisions. This according to analyst Quasar Elisundia of Pepperstone. In terms of macroeconomics, the focus will continue to be on China, as well as India. India will become the next leading driver globally. S&P Global Commodity Insights expects India’s oil demand growth to surpass China’s this year.

Even weaker growth markets like the European Union are showing increasing oil demand. At least according to import figures. The latest information from the second quarter in 2024 shows a decline in natural gas imports, with an uptick in what the EU categorizes as “petroleum oils.” The EU is not an oil market that traders look to for insight into demand trends, but it could be an indication.

On the supply side, all eyes remain on OPEC+. Forecasters have made traders nervous and bearish for months with in mind the spare capacity OPEC could bring online once a decision is made to roll back production cuts. What these forecasters consistently forget to mention is that OPEC and its OPEC+ partners have been clear at the start of the output cuts that production will not be increased again until the price level is high enough. This means that the various price cuts in 2024 were entirely the result of unrealistic expectations. And thus had no connection to real, fundamental oil factors.

In the current context, the fundamental factors seem to be largely balanced. A supply glut is expected this year based on assumptions about EV adoption, which so far appears to be disappointing. Trump’s sanctions on Iran could further tighten supply from the Middle East and give some upward momentum to the price. But probably the large safety net of spare capacity of 5 million barrels per day will be enough to prevent an extreme price rise.

The Brent price started the new year on a positive note. It is basically a continuation of the trend from early December, with a higher bottom around December 20, 2024. Price and lagging line are comfortably above the 4-hour cloud.

Price Crude oil – Brent March 2025 ($/barrel) – 4-hour cloud candle, log scale

Elec­tricity

“We understand that countries always need more money, but if you really want to electrify then you can’t have too high a tax burden on electricity compared to the tax burden on gas, for example.” – Leonhard Birnbaum, CEO E.ON.

European countries must find ways to reduce taxes on electricity so that the competitiveness of Europe’s energy-intensive industries can be restored.

Thus Leonhard Birnbaum, president of electricity lobby Eurelectric and E.ON top executive

Electricity prices in the EU, for example, are up to three times higher than in America.

This further erodes the competitiveness of energy-intensive industries including aluminum, steelmaking, chemicals and cement production. Morten Wierod, top executive of Swiss giant ABB indicated that Europe will continue to lose competitiveness and jobs if it does not address high energy costs relative to other regions. To achieve this, taxes must be lowered.

A problem with these taxes lies in the fact that some of the levies and premiums on electricity are determined by individual EU countries themselves.

In December, Eurelectric and representatives from CEFIC and European Aluminium discussed how to strengthen European competitiveness and electrify industry. The group proposed 6 actions to reduce the pressure on energy-intensive industries through the:

  • facilitating access to power purchase agreements (PPAs) and long-term contracts for industrial customers
  • stimulating funding for low-carbon technologies
  • Levelling electricity taxes and charges
  • developing flexibility
  • addressing infrastructure bottlenecks
  • Creating high-quality jobs.

Solving the perverse energy tax in Europe is one way to reduce energy prices and support electrification.

Thus Eurelectric and the lobbies of energy-intensive industries. Taxes on electricity in the EU as a share of the final bill are 3 and 3.5 times higher for households and industries, respectively, compared to natural gas.

“A functioning market with long-term investment signals, incentives to strengthen infrastructure and lower taxes on electricity are no-regret solutions that can be implemented immediately,” believes Kristian Ruby, secretary general of Eurelectric.

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

Natural gas

“Cheap Russian gas was essentially the backbone of some European economies for half a century. That is now coming to an end. And Europe will face higher gas prices for an extended period of time.” – Stephen Stapczynski, Bloomberg journalist

Samantha Dart, head of natural gas research at Goldman Sachs expects colder-than-average weather in the EU over the next two weeks to be a stronger driver than the termination of Russian gas supplies through Ukraine.

Low wind production across Europe and Norwegian production outages in December also play a role. As a result, EU gas prices will continue to rise. Consequently, these reached levels above €50 per MWh on Friday, January 3. This price level was printed for the last time in Q4 2023.

“If this cold forecast materializes without other offsets, we see significant risks of TTF prices switching to oil in the range of €63 to €84 per MWh in the coming months, well above our TTF base case of €40 per MWh 2025 at average weather, to help manage European gas storage,” Dart said.

The latest data from Bloomberg shows that EU natural gas storage was 71.8% full at the beginning of the new year.

This is well below the 16-year average of 74.29% for the same point in time. It shows that due to higher heating demand and tighter supply, the continent is having to tap supplies at the fastest pace in 4 years.

Russian gas exports via Soviet-era pipelines through Ukraine were halted on New Year’s Day.

The end of 50 years of Moscow dominance in European energy markets, as well as the end of cheap gas for the German economy, among others. According to Reuters, this halt is unlikely to have an impact on EU consumer prices. As in 2022, when declining supply from Russia pushed prices to record highs.

A fairly naive expectation given that European natural gas prices have been rising for almost all of last year.

The year 2024 closed at levels more than two times higher than the low price points in early 2024. And possibly the upward trend is just beginning.

The last European buyers of Russian gas via Ukraine, such as Slovakia and Austria, have already arranged alternative, more expensive offers.

Hungary continues to receive Russian gas through the Turk Stream pipeline running under the Black Sea. Russia and the former Soviet Union have built up a large share of the European market over half a century to a peak of about 35% in 2018.

The TTF gas price for 2025 has been trading above the weekly cloud since October 2024.

The lagging line came above it with the rally in the last 3 weeks of 2024.

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

Coal

“Order your espresso before it’s too late. It will be more expensive in 2025, and anyone trading – or observing – the energy and commodity markets in the new year will need caffeine to survive.” – Javier Blass, energy columnist Bloomberg Opinion

Commodity columnist Javier Blass expects 2025 to be a volatile year for coffee, oil and other commodities.

He writes that coal will be one of the commodities that receives less attention, despite its great importance in the energy system.

For years, coal was seen by many as “dead or dying.”

In 2021, at the COP26 climate summit in Glasgow, the world came to an agreement to declare coal as history. However, the sector is alive, omnipotent and ubiquitous.

In 2024, the world consumed a record volume of coal.

This year will be an important year to see if a trend change is visible. Blass is pessimistic about such a trend change because China has adopted coal as the cornerstone of its energy system, with renewable as a complementary. The Asian country alone consumes 30% more coal than the rest of the world combined.

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

Emission certificates

“A total of 88.9% of all new passenger car sales were battery-powered EVs, up from 82.4% in 2023.”

Norway set another record for EV market share in 2024.

According to the Norwegian Road Federation, 9 out of 10 newly sold passenger vehicles were electric. The Tesla Model Y was the best-selling car in Norway last year, followed by Tesla Model 3, Volvo EX30, Volkswagen, ID 4 and Toyota bZ4X. EV sales in Norway are expected to reach new heights in 2025, expects Christina Bu, head of the Norwegian EV Association.

Government incentives for EV purchases, combined with higher taxes for new internal combustion engine (ICE) cars, are driving the continued increase in EV sales in Norway.

The country of 5 million has the largest EV market share worldwide and is Western Europe’s largest oil and gas producer. Denmark, the second largest developed country in terms of EV share, has only just passed the 50% mark.

The average EU share of EV sales relative to all new car sales is only 13%.

Germany, the largest European market, has about the same share. Norway is an outlier in EV sales in Europe, as electric car sales on the continent have declined. The share of battery-electric car sales in the EU, which excludes Norway, fell to 15% in November. A year earlier it was 16.3% while volumes declined by 9.5%, according to the European Automobile Manufacturers’ Association, ACEA.

Last October warned automaker BMW warned that an EU ban on the sale of gasoline and diesel cars from 2035 is no longer realistic amid sluggish EV sales.

The European auto industry will begin to see a massive contraction with such a ban.

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

Renew­able

Europe: The fall of renewable energy

Electricity production from solar and wind drops dramatically during adverse weather conditions.

In fact, it happens every year. However, this type of weather condition now has far-reaching economic and environmental repercussions and reveals the shortcomings of energy policies based entirely on variable, renewable energy.

How is it that Germany, with one of the highest carbon footprints, now consumes the most expensive electricity in Europe?

Over the last 15 years, Germany invested massively in solar and wind power, while phasing out its own nuclear power plants. By 2023, renewables accounted for 55% of the country’s electricity production, up from 48% the year before.

The main contribution to renewable energy came from wind power. Wind was responsible for 31% of total production, followed by solar power with 12%, biomass with 8% and other renewable sources such as hydro-power for the remaining 3.4%. By 2024, renewables already accounted for 60% of Germany’s electricity production in the first half of the year. However, this level of production is spread out over a period of time and does not reflect critical moments such as the “Dunkelflaute.”

Dunkelflaute, the literal meaning is “flat, dark calm. Dunkelflaute is characterized by a simultaneous lack of wind and solar in winter, when electricity demand is at its highest. These episodes last from several days to several weeks, with solar and wind output occasionally decreasing to less than 20% of capacity. Sometimes even to 0%. On December 12, 2024, for example, German electricity production from wind and solar was 30 times lower than the demand for it.

Renewable policies would be bearable with a renewable energy source independent of the weather, such as nuclear.

However, in 2011, right after the Fukushima disaster, Germany decided to phase out nuclear power. Fully operational power plants were gradually shut down. This decision reduced the country’s capacity to produce stable, predictable electricity. Instead, firing, cooling, etc. became exteemly vulnerable to fluctuations in renewables. In short, if there is neither wind nor sun in Germany, the lights go out. The phasing out of nuclear electricity has made Germany incapable of being self-sufficient in energy, especially during Dunkelflaute. The country imports electricity widely from France, Denmark and Poland. The country uses coal and lignite for its own electricity production. Large-scale electricity imports also lead to higher prices for its neighbors.

The prices are staggering. In 2024, the electricity price for a German household was the highest in Europe at €400/MWh. With peaks of € 900/MWh during episodes of Dunkelflaute. By comparison, the average price in nuclear-powered France and Finland was €250 per MWh during the same periods in 2024. And in America, rates are 30% lower than in France. How can that be sustainable for Europe?

Despite its commitment to so-called green energy, Germany still has a high carbon footprint.

This is due to its increased reliance on coal and lignite (lignite) to supplement energy shortages. In 2024, the country remains the second largest CO2 emitter per unit of energy produced in Europe. A significant portion of electricity comes from fossil fuel sources. Gas and oil also fall under the definition of “fossil. Germany generates 10 times more CO2 per unit of energy produced than France.

Economic and geopolitical implications.

High electricity prices in Germany are leading to the relocation of its industry. Companies are looking for places where energy costs are more affordable. How can you stay viable when you have to pay 3x more for electricity than your competitors? Natural gas prices are even five times more expensive in Europe than in America.

Large parts of Germany’s proud industry are collapsing.

We remember only the big names: VW, BASF, Mercedes-Benz. With every big name that disappears or downsizes, small and medium-sized companies are also swept along. Energy-intensive sectors such as metallurgy and chemicals are hit especially hard.

Germany’s dependence on its neighbors for energy supply has created tensions in Europe.

High electricity prices in Germany are being passed on to neighboring countries, making electricity unaffordable there as well and causing increasing frustration. There are noises in Europe about withdrawing certain energy agreements, especially related to electricity imports.

In short, Dunkelflaute is the symptom of a deep energy crisis caused by an ideological, authoritarian and failed energy transition.

Dependence on unreliable energy sources (wind, solar), combined with a hasty phasing out of nuclear electricity, has made Germany’s electricity the most costly in Europe. It compromises the energy autonomy of this country, and ultimately of Europe.

The consequences are varied:

  • Environment, with high CO2 emissions;
  • Economy, with industry shrinking sharply;
  • Geopolitically, with Germany’s neighbors fed up with its failing energy dictate.

Given Germany’s demographic and economic weight, this most recent German misstep is proving yet another European catastrophe.

Source: Drieu Godefridi is a lawyer (University Saint-Louis, University of Louvain), philosopher (University Saint-Louis, University of Louvain) and PhD in legal theory (Paris IV-Sorbonne). He is an entrepreneur, CEO of a European private education group, director of PAN Medias Group and author of The Green Reich (2020).