Czech gas exchange prices rise: new household fixed tariffs to become more expensive

Households must prepare for rising gas prices in the coming months. However, this will not be a blanket increase; prices will rise mainly for new fixed-price contracts. This follows from comments by analysts contacted by the Czech News Agency (ČTK). According to them, the price increases will result from the current rise in exchange-traded gas prices, driven by geopolitical uncertainty and lower filling levels at European gas storage facilities. Analysts said further market developments will depend on the weather and the evolving situation in the Middle East.

The wholesale gas price for the European market exceeded €70 (CZK 1,690) per megawatt-hour (MWh) on Monday, its highest level since March.

The price of gas has more than doubled since the start of the year, XTB analyst Jiří Tyleček noted. "The main reasons are uncertainty surrounding supplies from the Middle East and low levels in European storage facilities," he explained. European storage facilities are currently around 65% full, compared with a usual level of around 80% at this time of year. "Europe is therefore likely to enter the heating season with the lowest gas reserves in several decades," Tyleček said.

According to Ruben Marada, co-founder and co-owner of Electree, breaking through the €70/MWh price threshold is a warning sign that the European gas market is entering another period of heightened uncertainty. He said the current rise is primarily linked to low filling levels at European storage facilities, geopolitical risk and concerns over LNG availability.

Analysts said households must therefore prepare for suppliers' price lists to rise. For now, however, this will not be an immediate, across-the-board increase. In this context, Tyleček noted that while rising exchange prices typically feed through to customers' bills with a delay of several months, wholesale gas prices have been climbing for several months already. "This protective cushion is gradually being exhausted. New price lists and fixed-price offers are therefore likely to start becoming more expensive. And the start of autumn looks like an ideal time for this to begin happening," Tyleček said. In his view, factors pushing gas prices higher in the coming months also prevail in the market, so longer-term price fixing may make sense for households.

Marada likewise does not expect the current price increases to be reflected broadly in end-user prices. "It depends on when and under what terms suppliers purchased gas. The effect will show up fastest in new offers and products linked to the current market," Marada said. If prices around €70 were to persist for an extended period, he said, the scope for further price reductions would close and new price lists would gradually become more expensive. "The current situation once again shows how important prudent forward purchasing and spreading purchases over time are," Marada added.

According to analysts, further developments will depend mainly on the weather, the course of winter and the situation surrounding the conflict in the Middle East. "A cold winter, lower wind power generation or a recovery in European industry would push prices even higher. More significant price declines, by contrast, would require a de-escalation in the Middle East and the restoration of LNG supplies," Tyleček said.

According to Marada, if the current situation does not improve, high prices and significant volatility can be expected over the winter. "However, we do not currently consider a return to the extremes of 2022 to be the base-case scenario," Marada added.