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The manufacturing sector in Germany experienced a deeper downturn in December, with industrial activity remaining firmly in contraction territory. This ongoing struggle stems from weak demand and mounting competitive pressures. Meanwhile, the European Central Bank (ECB) has implemented its fourth interest rate cut of 2024, reducing rates by 0.25% and cautioning that growth forecasts are weaker than anticipated. In the UK, the Bank of England maintained interest rates at 4.75% in December, grappling with persistent inflation and robust wage growth. Future rate reductions are expected to be gradual. Furthermore, UK employment surveys reveal the steepest decline in job vacancies in over four years, exacerbated by rising employee costs linked to the Autumn Budget.
Oil prices exhibited little movement in December, with Brent crude trading within a narrow $4 range, closing at $74 per barrel. Market sentiment alternated between concerns over supply security, amidst heightened geopolitical tensions, and sluggish growth in global oil demand. The Energy Information Administration projects a 20% drop in US net crude oil imports by 2025, marking the lowest level since 1971. This shift is driven by increasing US oil production coupled with declining refinery demand. Meanwhile, the EU has adopted its 15th package of sanctions against Russia, targeting 33 vessels involved in transporting crude and petroleum products. Similarly, the UK imposed sanctions on 20 ships carrying illicit Russian oil.
EDF plans to extend the operational life of its Heysham 2 and Torness plants by two years to March 2030, and the Heysham 1 and Hartlepool plants by one year to March 2027. Additionally, Hinkley Point C in Somerset may begin partial operations by 2029. In France, EDF achieved the first grid connection for the Flamanville EPR reactor on 21 December 2024, joining existing EPR reactors in China and Finland. Gas market volatility, driven by uncertainties surrounding Ukrainian deliveries, has influenced power prices, with Summer 2025 contracts trading within a £15/MWh range and closing December at £89.00/MWh, a £4.00 increase.
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Efforts by energy firms and Transmission System Operators in Hungary, Slovakia, Austria, and Italy to negotiate a deal for the gas transit route via Ukraine have failed. This impasse has contributed to a rise in European gas prices, now at their highest since October 23. Notably, Venture Global's LNG tanker, Venture Bayou, has departed Louisiana's Plaquemines export plant for Germany, marking the plant's first LNG export while construction continues. Cheniere Energy also announced the first LNG production from its Corpus Christi Stage 3 project, with completion anticipated by the end of Q1 2025. December's fluctuating temperatures and wind generation have caused corresponding shifts in gas demand, with European storage facilities at 73.2% capacity—a 13.5% month-on-month decrease—as a cold wave looms and Ukrainian gas deliveries cease.
The coming week anticipates colder-than-average temperatures in the UK, which, combined with the cessation of Russian gas imports via Ukraine, has propelled gas prices to their highest since October 23. The Summer 2025 contract rose significantly, from 94.00 ppt on 16 December to 120.00 ppt, highlighting the rapid withdrawal rates from storage facilities and the tight market outlook for winter's end. Looking beyond 2026, a subdued European economy and increased global LNG production are expected to drive prices lower, provided no major supply disruptions arise from the Middle East.
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