The price of natural gas fell sharply in mid-February, reaching its lowest levels since the beginning of the year. According to analysts, the reason was the easing of tensions in Ukraine. Apart from the geopolitical factors, the relatively warm weather in continental Europe, as well as in Bulgaria, also contributed to the decline. We have witnessed prices of around 68 – 73 euros / MWh on the European gas exchanges, which are significantly below the levels of 90 – 100 euros / MWh observed in the recent months.
Unfortunately, at the end of the month marked by the beginning of the war in Ukraine, the natural gas market reacted extremely, reaching record prices for 2022. Thus, in just a few days, the price of natural gas doubled. This justified expectations of a sharp increase in military escalation and this trend is likely to continue over the next days. However, current price levels remain slightly below December levels, when gas was traded at 180 euros/MWh.
In a scenario that does not affect gas supplies, the increase in prices will have а lesser effect on the Bulgarian market. The formula in Bulgargaz`s contract with Gazprom includes the average monthly prices for February, which are likely to be lower or comparable to those in January.
However, Bulgaria is in a difficult position, in which the contract with the Russian gas supplier expires at the end of the year, and in the current war situation it is not clear what new contract can be signed.
The military action will also affect futures for the next few months, which raises many questions about electricity prices. They also set records in the last 3 days. Only the prices of emission allowances fall by more than 25%, reaching levels of around 66-68 euros / ton, favoring electricity generation from coal.
Source: Capital