Energy market analysis March 19, 2025

“Russian oil companies have been using crypto assets, including Bitcoin and Tether’s USDt, for international trading.” – Reuters

Sanctions on Russia, as well as tougher sanctions on Iran’s shadow fleet, have caused a run on non-sanctioned vessels. As a result, daily rates doubled or even tripled over the past month.

Russia seems to prioritize deliveries toward China. The country has redeployed its tanker fleet in service of the Russia-China route at the expense of India. This shows analysis of recent ship-tracking data.

Since US sanctions came into effect, only 5 of the 19 ships loaded from Russia’s Sakhalin Island have been able to deliver their cargoes to their final destinations. This writes Julian Lee of Bloomberg. Similar cargoes from Sakhalin used to spend about a week at sea. Tanker-tracking data indicate that some tankers are now at sea for nearly two months.

Deliveries from Russian pool projects have also been delayed for weeks. India is staying away from sanctioned tankers, while both China and India are trying to divert their supply chains by using tankers, traders and insurers not subject to U.S. sanctions. According to Reuters, Russian companies have been using crypto-currencies such as Bitcoin and USDt to enable trade with China and India under international sanctions. Russia’s finance minister stated in late 2024 that Russia is free to use assets such as Bitcoin in international trade. However, the use of crypto in oil transactions with China and India had not been reported before.

According to Reuters, Russian oil crypto trading with foreign countries involves middlemen managing offshore accounts and facilitating transactions in the buyer’s local currency. An example: a Chinese buyer of Russian oil pays a trading company acting as an intermediary in yuan into an offshore account. The intermediary converts these payments to crypto assets and transfers them to another account. Then the asset is sent to a third account in Russia and converted into Russian rubles.

According to Reuters, crypto will likely continue to be used in Russia’s foreign oil trade despite the sanctions in place. Even if sanctions were lifted and Russia were free to use the dollar. It is a convenient tool and helps carry out activities faster, according to an anonymous source. The news comes amid Russia’s official proposal to legalize investment in cryptocurrency for affluent individuals who hold at least $1.1 million in securities and deposits.

While Russia is open to Bitcoin for foreign trade, among other things, China has a cautious and restrictive approach to crypto currencies. Ever since banning all crypto currencies in 2021, China has had a restrictive agenda on crypto. Despite the restrictions, China has remained one of the global leaders in Bitcoin mining. Neighboring country and jurisdiction Hong Kong has blossomed as a global crypto hub.

As America continues with its strategic Bitcoin reserve initiative, some industry analysts believe China will not ignore the increasing role of Bitcoin (BTC) in the global financial landscape. The Chinese government could own at least 194,000 BTC, according to data from Bitcoin technology company Jan3. America holds 112,189 BTC, according to Jan3.

The price of crude oil for delivery in May, is still trading in a large, volatile range between roughly $70 and $82.50. Several oil-producing countries will begin phasing out production cuts of 2.2 million barrels per day starting in April. That means 138,000 more barrels per day will enter the market in April.

Price Crude oil – Brent May 2025 ($/barrel) – week cloud candle, log scale

“Volatile wholesale electricity prices create uncertainty, for renewable energy companies, about the impact on revenues and future investments, underscoring the need for storage and grid expansion.” – IEA

Europe’s electricity systems are largely connected through a complex network of high-voltage power lines and interconnections between countries. This system is part of the synchronization area of the European power grid. It ensures stable power supply and energy exchange between countries.

In early March, several European EPEX spot markets saw the first negative price hours of this year. The strongest solar electricity production in Germany since September 2024 pushed intraday power prices below zero in Germany, Belgium and the Netherlands on Monday, March 3. The 1 p.m. to 2 p.m. price was -/- €17.73 per megawatt-hour (MWh). Due to the interconnectedness of the Northwest European electricity systems, electricity prices in Belgium and the Netherlands also dipped below zero.

Negative electricity prices, while beneficial to some customers in a number of countries,typically discourage investment in new capacity as renewable power producers do not benefit from prices below zero. Last year, European electricity markets saw a record number of prices of zero or negative amid sharply increased renewable energy supply and a mismatch between supply and demand hours for solar power.

Read more about negative price hours with possible solutions in our article.

Record negative hours are expected again this year in both the EPEX market and the imbalance market. The International Energy Agency (IEA) wrote about this in its World Energy Investment 2024 that volatile wholesale electricity markets create uncertainty for renewable companies in terms of the impact on revenues and future investments. It underscores the need for storage and grid expansion.

Aurora Energy Research warned in January that negative prices, market saturation and grid congestion pose major challenges to renewable energy development in Europe. So-called “intermittent” or variable renewable energy capacity in Europe will more than triple by 2050, according to the power market analysis firm. And yet negative prices and grid constraints will remain significant risks in today’s renewable asset market. This will be exacerbated by even more renewable deployment, said Rebecca McManus, Renewables Lead, Pan-European Research at Aurora Energy Research.

It is vital for developers to explore options to reduce the risks of negative price hours for projects, such as portfolio diversification.

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

“Europe will be put to the test at the end of winter in terms of the resilience of its energy system.” – Charles Kennedy, journalist Oilprice.com

A sudden polar wind brings freezing temperatures to major European countries. European gas stocks stand at just 34.5% capacity. Significantly lower than last year. Forward contract prices for European natural gas rose in anticipation of higher demand. Europe’s higher temperatures of March 9 and 10 abruptly turned to freezing temperatures last weekend and this week.

This puts Europe’s renewable electricity production and low natural gas supplies to the test once again. Although last weeks temperatures were as high as 20 °C , a polar wind has brought the temperatures down. Wind speeds have decreased in an end-of-winter test of Europe’s energy system. Britain, Germany, France and even Spain are expected to experience freezing temperatures.

Low electricity production from wind and solar during winter conditions will further challenge the systems. All the more so now that gas buffers are only 34.5% full. Dutch prices for forward TTF natural gas traded higher last week due to expectations of lower temperatures and an expected decline in renewable generation. So far, low winter temperatures and moments of low wind production have led to strong withdrawals from gas supplies. Combined with the termination of Russian pipeline gas through Ukraine, this has pushed prices higher.

The IEA warned last month of a tighter LNG market in 2025 as low EU gas supply levels at the end of this winter require greater gas inflows than in the past two years. This will require Europe to rely more heavily on global LNG markets. Market fundamentals will tighten. The good news for Europe is that so far this year, the continent has been beaten on price by Asia. There are sufficient supplies and along with tepid demand, price spikes of spot LNG delivered to Northeast Asia have failed to materialize. The bad news for Europe is that because of the need to replenish supplies from much lower levels than previous years, the forward TTF gas price for summer 2025 is trading at a premium above next winter’s price level. This generally discourages the incentive to stockpile a commodity.

In the Netherlands, the House of Representatives has indicated a desire to build a strategic reserve of natural gas. This is already there for oil. The stockpile would be needed the moment other countries suddenly stopped wanting to supply gas. One is looking at a 90-day supply, just as has been the practice for years for oil.

National gas network operator GTS’s transmission tariffs will rise an average of 48% next year compared to this year. It is the second year in a row that these tariffs will increase about one and a half times. The Consumer & Market Authority has yet to approve that proposal.

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

The global coal market remains well supplied. Some mines have been ordered to cut production to reduce the current oversupply.

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

“Ambitious goals and high costs threaten to penalize households and small businesses.” – BloombergNEF

The new EU Emissions Trading System for buildings, road transport and small industry, ETS2, is scheduled to become fully operational by 2027. The European Union’s new emissions trading system will sharply increase the cost of heating and transportation. Thus a recent report by BloombergNEF.

ETS2 should cover and address CO2 emissions from fuel combustion in buildings, road transport and additional sectors, especially small industry not covered by the existing Emissions Trading Scheme – EU ETS. So far, emission reductions in those sectors have been insufficient to put the EU on track to achieve its climate neutrality target by 2050. The carbon price set by ETS2 will provide a market incentive for investments in building renovation and low-emission mobility.

Although it will be a cap-and-trade system like the existing EU ETS, the ETS2 will cover upstream emissions. This means that it will be fuel suppliers rather than end users such as households or motorists who will have to monitor and report their emissions. The user will then not pay directly. However, fuel suppliers will want to pass on the higher costs of carbon emissions trading to the end user.

Two years after the 2027 launch, the price of CO2 could rise toward €150 per metric ton (MT), BloombergNEF expects. Such a price in 2029 represents more than twice the current market price of CO2 under the existing EU ETS trading system for emissions from industry and power plants. The carbon price in EU ETS2 could increase the cost of road transport by 27%, while the bill for heating a home could rise as much as 41%, BNEF said.

The price for CO₂allowances rose toward €70 on a weekly basis. In addition to the relatively strong correlation with the gas market, it is mainly the economic figures that determine the price.

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

“While nuclear power remains the continent’s main energy source, wind power has a larger share than natural gas. Last year, for the first time in Europe, more electricity was generated by solar power than coal.” – Alex Kimani

Since the adoption of the REPowerEU Plan, the EU has diversified its supply and drastically reduced Russian fossil fuel imports. Last year, renewables contributed 48% of the EU’s electricity mix, followed by nuclear at 24% and fossil fuels at 28%, the lowest share ever. Some European leaders are calling for a return of Russian gas to European markets.

Since the adoption of the REPowerEU Plan, the EU has diversified its supply and drastically reduced Russian fossil fuel imports. EU sanctions imply a ban on overseas imports of Russian crude oil and refined petroleum products, as well as Russian coal. Imports of Russian gas have collapsed. This puts the EU on track to completely phase out gas from Russia in the coming years.

Fossil fuels, including natural gas, are gradually losing their grip on EU energy. Renewable remains by far Europe’s most important energy source. As previously reported, last year renewable energy’s contribution was 48% of the EU electricity mix, followed by nuclear (24%) and fossil fuels (28%). 2024 saw the lowest emissions from the EU electricity sector with a 13% decrease from 2023. Although nuclear remains the continent’s main source of electricity, wind power outpaced natural gas. Meanwhile, Europe’s solar generation in TWh last year exceeded coal-based electricity generation for the first time.

Source: Ember

This trend began even before Russia’s invasion of Ukraine. Since the adoption of the European Green Deal in 2019, wind and solar have slowly pushed the coal resource to the margins and natural gas into a structural decline. Europe’s green energy transition has gathered additional momentum over the past 3 years due to the war in Ukraine.

The European Union has measures implemented to significantly shorten the approval process for renewable energy projects. These include designating specific “Renewable Energy Acceleration Areas” where projects undergo simpler and faster permitting procedures aimed at handling the development of renewables such as solar and wind power across the EU block. The revised Renewable Energy Directive (RED III) should also provide for this and facilitate power purchase agreements (PPAs).

However, it is unlikely that Europe can throw natural gas out of its energy mix in the short term. Renewable energy systems lack the baseload capacity to handle sharp demand spikes and cannot respond quickly to unforeseen supply-side shortages.

Renewable: the cobalt market

“The oversupply in the cobalt market is mainly due to the growth of mined supply in the DRC.” – Robert Searle, Fastmarkets analyst

The Democratic Republic of Congo (DRC) has imposed a four-month export ban on cobalt. This has driven up the price of the essential metal used in ion lithium batteries, the backbone of the renewable energy industry.

Data from New Fastmarkets show that a pound of cobalt hydroxide, the DRC’s main export product, has become 84% more expensive. DRC, the world’s largest producer of cobalt, last month sought to counter an oversupply that caused multi-year lows in prices. Tuesday, March 11, prices reached $10.50 per pound, the highest level since July 2023. The price of cobalt metal also rose 43% from the low point.

Telf Ag, the marketing agent for cobalt mined in the DRC by Eurasian Resources Group, has invoked force majeure clauses included in supply contracts. In doing so, it justifies postponing deliveries because the export ban is beyond its control. Telf told customers that the impact of the ban has yet to be assessed and that it is unable to fulfill any delivery obligation. A Telf spokesperson tells Bloomberg that the cobalt export ban was publicly announced by the DRC government and like many other industry participants, they are currently assessing options in response to these developments.

According to the US Geological Survey, the DRC produces 76% of the world’s cobalt supply, essential for the electric vehicle (EV) market. A four-month suspension of cobalt exports is likely to start causing higher prices in the short term, followed by falling prices. Robert Searle, analyst at Fastmarkets says the temporary ban could bring “great risks” to Chinese companies that have invested billions of dollars in the DRC’s mining industry. This uncertainty and the ban have caught them by surprise and may deter further investment in the country.

Cobalt prices are expected to continue rising in the coming weeks. After that, however, prices will quickly fall again after the export ban is lifted. A long-term supply agreement is needed for balancing production rather than short-term solutions.