Severe frosts could push gas prices above 100 euros per MWh in Czechia

Gas prices in Europe could continue to rise, with the coming winter set to be a key factor in their further development alongside the geopolitical situation, analysts say. Prolonged and severe frosts could drive prices up by tens of percent, while a typical winter would most likely keep them at their current level. Prices are not expected to fall any time soon; even if tensions in the Middle East ease, gas prices on the market will not start falling until next year at the earliest. This is according to comments from analysts to the Czech News Agency (ČTK). They say there is no risk of a gas shortage.

"There isn't enough gas in Europe for us to ignore a severe winter. If several weeks of heavy frosts hit Germany, Czechia and other countries at the same time, Europe will compete fiercely for every additional delivery. And the main tool in that competition will be price," said Martin Pacovský, investment director at the Arete Energy fund.

According to him, the main problem will not be a physical shortage of gas, but its price. Short-term European gas prices are currently around 80 euros per megawatt-hour (MWh). In the event of a typical winter, Pacovský expects prices to remain at this level in the coming months. But in the event of a long and cold winter, he says a price range of around 100 to 130 euros per MWh is realistic. If frosts coincide with further constraints on global LNG supplies, short-term prices could spike even higher.

"A price above 100 euros per MWh would already pose a major problem for energy-intensive industry and, gradually, for households too," Pacovský said.

XTB analyst Jiří Tyleček also cites rising gas prices as the main risk. "Prolonged frosts combined with another LNG supply disruption could send prices sharply higher," he said. He noted that seasonal forecasts currently lean slightly towards a warmer European winter, which would limit gas consumption. On the other hand, they do not guarantee a warm autumn in Czechia or rule out prolonged frosts. "Gas will therefore remain a commodity whose exchange price can be shifted by a single forecast or one piece of news from Hormuz. A brief price spike cannot be ruled out," Tyleček added.

Greenbuddies chief analyst Tomáš Krejčí noted that gas still costs one-fifth of its 2022 energy crisis peak, but European stocks are also significantly lower. Even a possible deal with Iran would not provide a quick solution, he said, as the market is not counting on relief until spring 2027. "The real test will come in February and March, when a prolonged period of frosts could push gas prices above 100 euros per megawatt-hour," he said.

Czech households will feel the impact of more expensive wholesale gas differently, depending on their contracts. "New offers will become more expensive in the coming weeks, and if purchase prices remain elevated for longer, I would not rule out an increase of up to a few dozen percent in the retail price of gas by the end of the year," Tyleček said.

If tensions in the Middle East ease, wholesale prices could fall more quickly, he said, but he does not expect a significant decline in standard offers for households until the second quarter of 2027 at the earliest. "This is an estimate that will depend mainly on how long the LNG disruption lasts and how the winter unfolds," Tyleček added.

According to Krejčí, businesses that buy gas at market prices will be the first to feel the impact of the current situation. Rising gas prices will gradually feed through to household bills.

According to Pacovský, the worst combination for households is a long winter and a low-cost fixed-price contract coming to an end at the same time. "Households signing a new contract should also prepare for a scenario in which their annual bill rises by tens of percent," Pacovský said.