European regulator: EU natural gas procurement costs fell to record low

According to a preliminary report by ACER on the European natural gas market, the cost of procuring natural gas on wholesale markets fell to a record low last year. Year on year, this represents an average decline of 4 EUR/MWh. Compared with the average price between 2012 and 2019, last year's average was even 8 EUR/MWh lower.

Earlier this week, ACER (the European Union Agency for the Cooperation of Energy Regulators) presented preliminary results from its annual report on the wholesale natural gas market in the European Union. According to the report, gas procurement costs fell by 4 EUR/MWh, with ACER assessing the price at which gas traders are on average able to buy on the wholesale market.

The obvious reason, also cited by ACER, is the price decline resulting from lower natural gas consumption. The decline was particularly noticeable at the end of the first quarter and in the second quarter of last year, when national lockdowns had the greatest impact.

The second reason was high imports of liquefied natural gas into the EU. In the first half of 2020, imports reached their highest level in history. Although imports gradually declined in the second half of the year, they remained comparable with the record year of 2019.

As ACER's report states, low consumption and high supplies filled underground gas storage facilities, creating further pressure on wholesale gas prices. Natural gas prices on spot markets in the second quarter were at their lowest since 2012, when ACER began publishing its annual report on the gas sector.

Prices on the Prague PXE exchange were also affected, with the lowest spot reference price recorded on 24 May at 3.8 EUR/MWh. By comparison, this week the price is again above 20 EUR/MWh.

ACER: Market price differences between member states are narrowing

In addition to lower natural gas procurement costs, the European regulator also welcomes the convergence of prices at major trading hubs, which it attributes to the European internal natural gas market.

Differences between individual markets were no greater than around 3 EUR/MWh last year, compared with more than 5 EUR/MWh in 2013.