Natural gas sellers to raise prices in March

Next month, both Elenger and Alexela are raising their natural gas prices in Estonia. According to one seller, behind the planned price hike is the rapid emptying of Europe's gas storage facilities and the obligation to refill them over the summer.
From next month, Elenger, previously known as Eesti Gaas, is raising the price of its flexible plan from €0.69 to €0.78 per cubic meter, while Alexela's flexible plans will increase from €0.69 to €0.71 per cubic meter.
Elenger most recently raised its prices in January — from €0.59 to €0.69 per cubic meter.
As hinted by its name, Alexela's flexible domestic gas plan changes monthly, and has likewise steadily crept up little by little from the November price of €0.599 per cubic meter.
Kristofer Vähi, portfolio manager at Elenger, says the current trend in global gas prices is upward, but whether that will remain the case is difficult to predict.
"We're not seeing the usual seasonality of futures prices, where spring and summer prices are trading lower than in winter," Vähi noted.
"It's very unusual, in futures prices, for this summer's futures prices to be as high as current winter prices, and even higher than the prices for next winter," he added.
The main reason behind these higher prices are the rapid emptying of gas storage facilities and the obligation in Europe to refill them over the summer.
According to Vähi, this trend has been further fueled by Germany, which is trying to solve a problem largely caused by state intervention with even more state intervention.
"Namely, due to the obligation to refill storage facilities, there is pressure to buy gas in the summer, regardless of the market logic of whether it can also be sold profitably come winter," he noted. "This raises summer prices higher than winter prices, discouraging market participants from stocking up on gas."
This, he continued, actually ends up reducing next winter's security of supply, thereby working directly against European regulators' intentions.
Cost passed on to European consumers
"Instead of reversing the obligation to fill storage facilities and allowing market forces to naturally stockpile the required amount of gas in summer, Germany has decided to subsidize the filling of storage facilities in summer by having German taxpayers — but indirectly also European consumers in general — cover the difference between cheaper winter prices and more expensive summer prices, so that energy companies will still store gas," Vähi explained.
The market, he added, sees this as a risk-free opportunity to buy gas for the next winter at any price.
"Naturally, any economic efficiency is lost and energy prices rise as a result of such actions," the portfolio manager observed.
Natural gas prices on the Dutch Title Transfer Facility (TTF) natural gas market hit their lowest point in years around a year ago, when the price of a megawatt-hour (MWh) fell under €30. Last fall, the price of a MWh rose to around €40, and by December 1, it had reached €48 per MWh.
Currently, natural gas is being traded at €52 per MWh, for both March contracts and for contracts covering the rest of the year through October.
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Editor: Barbara Oja, Aili Vahtla