Czech energy prices are expected to continue stabilizing next year, analysts say

Energy prices on the energy market are expected to continue stabilizing next year, with similar fluctuations to those seen during the energy crisis unlikely. Under favorable conditions, prices could fall slightly further, but they will not return to pre-crisis levels. That is the view of analysts contacted today by the Czech News Agency (ČTK). They caution, however, that the energy market could again be affected by geopolitical developments.

Wholesale electricity and gas prices rose to record highs last year, by as much as hundreds of percent. This year they have gradually fallen, and the trend has continued toward the end of the year. For example, the electricity contract for delivery next year is at its lowest level since summer 2021. Electricity is currently trading at 99 euros (about CZK 2,435) per MWh on the Leipzig energy exchange, excluding VAT, while gas has fallen to around 40 euros (CZK 985) per MWh. Despite the price decreases, levels are still several times higher than before the crisis.

„The low prices are due to negligible economic growth in Europe, warm weather and larger volumes of allowances that will be released onto the market next year,“ explained Jiří Tyleček, an analyst at XTB.

However, he said significantly more favorable prices could not be expected next year, as the impact of current factors should gradually fade. „The recovery in Germany, Czechia and other Central European countries will therefore be the main factor next year. There is no sign of a rapid upturn yet, but in the second half of the year we should see growing upward pressure on energy and energy commodity prices,“ Tyleček said. He therefore believes the coming months offer an opportunity to lock in energy prices for the long term.

„Gas prices on the energy market should be much less volatile next year than during the crisis,“ said Barbora Formánková, spokesperson for energy investment company EFG.

She noted that the current level of gas storage in Czechia is good news, with storage facilities 89 percent full according to Wednesday's figures. „Given how well prepared we are for the season, the main factor that could push prices up is the weather, but that would require severe and prolonged frosts; these would be extreme conditions that are not expected. Chinese demand for LNG could also have an impact,“ Formánková said. According to Václav Skoblík, sales director at UCED, gas prices could also fall next year. „That is assuming there is no further geopolitical conflict affecting production or transport,“ he cautioned.

Analysts say it is harder to forecast developments in the electricity market. Skoblík pointed to the current situation on the German EEX exchange, where the price for 2025 is higher than for next year. This has happened for the first time since December 2021. „It is a clear indication that, given uncertainty over input prices, producers will not be willing to sell at lower prices for future delivery. We will see whether this trend is confirmed,“ he added. Overall, however, he expects energy commodity prices to fall. Formánková noted that electricity prices on the market are largely linked to gas prices, so similar assumptions apply. She also highlighted the impact of emission allowances, whose price is difficult to predict.

According to analysts, the movement in the oil market will traditionally be the primary factor determining fuel prices. Tyleček noted that price pressures had eased in recent months and oil was at a five-month low in December. „Demand will be the decisive factor next year, and it will be stronger the faster global economic growth accelerates,“ he said. Given the rather surprising increase in production in some countries, he does not expect the oil price to exceed 100 dollars per barrel. It is currently at 79 dollars per barrel. „If that happens and the Czech koruna does not weaken significantly, petrol and diesel prices should remain below the CZK 40 mark,“ Tyleček added. He also warned of possible risks associated with rising geopolitical tensions, which could negatively affect supply.