Natural Gas Prices – Quarterly Bulletin – Intelligent Energy Association

by Dumitru Chisalita

• Editorial

At the end of this year, a 3-year period ends since the Romanian gas market, with the exception of the residential sector, was liberalized. An important element of liberalization (in Romania it is considered to be the only one) is the price. But the gas price in a liberalized market is a unitary outcome of the market value and represents the amount for which a quantity can be exchanged on a given date, between a determined buyer and a determined seller, in a balanced transaction, after appropriate marketing, in which each party acts in an informed manner, prudently and without compulsion. Romania has few sources of information and none of these presents analyzes and trends of gas prices. The Intelligent Energy Association will quarterly prepare the Gas Price Report, on the basis of existing public data in Romania to help consumers and suppliers and develop the liberalization of the gas market in Romania.

• History and trends of gas prices in Romania

Analyzing the transactions between January and September 2017, within the platforms provided by the Romanian Commodities Exchange (BRM), we determined the weighted average price with the quantities of gas purchased for one month and immediate delivery on the wholesale market, showing the downward trend in gas prices in the summer period by 12% compared to the peak reached in February 2017. We note that transactions on the gas exchange were almost exclusively made with gas from current domestic production.

Analyzing the transactions carried out through BRM, during this period it is noted that the price of gas paid for daily purchases (2-3 days) was by 6.8% higher than the weighted average price of the respective month for imported gas and 1.9% for gas from current domestic production.

Analyzing the price of the gas offered on the wholesale market through the trading platforms of BRM with delivery in the months of October – December 2017 and January – March 2018, we have estimated a trend of the gas price from the current production on the wholesale market, with monthly delivery. The price of gas during the winter is strongly influenced by the price of imported gas and the price of the gas stored, so the average price of gas on the wholesale market in the winter 2017-2018 will be higher than these values.

Transactions through the exchange on the retail market are relatively few, making the analysis to have a high degree of relativity. In order to be able to compare the prices of gas traded, as commodity, we determined for each consumer who performed transactions the regulated tariffs and thus deducted the price of gas as commodity. Average prices of transactions between January and September 2017 show distinct prices for the four consumer categories B1-B4, with prices, excluding tariffs and taxes, set at RON 72-78/MWh.

• History and trends of gas prices globally

Analyzing the global trends of natural gas prices, the gas price trend is upward during winter, at a similar level with the price increase found in Romania. The CEGH exchange in Vienna, the closest gas exchange in Europe, shows an increase in the price of gas according to futures contracts, by about 7%, customers expecting that this gas will be traded during the cold season at RON 84-88/MWh. The experience of the past years allows us to use this price as a benchmark for the price of gas from the Russian Federation sold in the Central and Eastern Europe.

The same trends of natural gas prices in the cold season 2017-2018 are in the US, where the trends presented by the Energy Information Administration show a gas price increase in the US by approx. 10%.

• Weather forecast

According to estimates of the National Meteorological Administration (NMA), for the winter of 2017-2018, we will have temperatures almost as in summer in October and November, and we will face very low temperatures in December and January. In October 2017, especially in the south and west of the country, it will be warmer than it should during this time of the year and many sunny days, with values over 14 degrees. Precipitation will be normal, between 20 and 40 l/sqm in the south, but in excess in the north of the country. In November 2017 there will be a weather with higher temperatures than we have been accustomed for this month, and rainfall will be lower in Moldavia and southern Oltenia. Normally, in this month, average temperatures are up to 5-8 degrees. In Decembrie 2017 we will face severe cold. (source: NMA)

• Consumption forecasts

The Ministry of Energy expects that in the winter of 2017-2018 there will be a similar situation as in the winter of 2016-2017, when there was a record gas consumption due to the extremely low temperatures (minus 15-20 Celsius degrees) recorded for a period of 7-10 days, according to the draft Energy Program for the winter 2017 – 2018, elaborated by the Ministry of Energy. (source: ME).

Image courtesy of Keerati at FreeDigitalPhotos.net