In March this year, the weighted average wholesale market price paid by Latvian natural gas traders for the purchase of natural gas reached the lowest level since the opening of the market – 11.50 EUR / MWh. Compared to the price in March 2019, it is about twice lower, informs the Public Utilities Commission (PUC).
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Due to the decline in wholesale natural gas prices, retail prices also decreased. According to the data compiled by PUC, in the 1st quarter of this year the weighted average price of natural gas for households decreased to 16.76 EUR / MWh, but for legal users to 19.17 EUR / MWh.
Compared to the 1st quarter of 2019, the price for households is by 40.63% lower, but for legal users by 26.24%. It is expected that the tariff for household connected users will be 6.7% to 10.8% lower in the second half of this year.
Purchase prices of natural gas are mainly linked to price changes on the European natural gas exchange, such as Germany’s Gaspool, the Netherlands’s TTF and Belgium’s ZTP. The sharp fall in stock prices contributed to the lowest price level in the last 10 years, which was observed in April and May this year.
The decline in natural gas prices was mainly driven by declining economic activity in China due to the Covid-19 outbreak, as well as warm weather in Northern Europe. As a result, the demand for natural gas for heating also decreased rapidly. Also, lower demand for natural gas was observed for electricity generation. The total natural gas consumption in Latvia from November 2019 to April 2020 was 21.27% lower compared to the same period a year ago.
The fall in prices and low demand for natural gas also contributed to the filling of natural gas storage facilities throughout Europe, including Latvia. In the case of the Inčukalns underground gas storage, the Finnish-Estonian-Latvian single natural gas market, which started operating on 1 January this year, also facilitated the filling.
“As a result of the new market conditions, traders’ interest in reserving capacity at the Inčukalns underground gas storage facility for the next pumping season in 2020/2021 was very high. efficient use of infrastructure, allowing to reduce the average cost of system services to users, “says Jānis Negribs, Head of the PUC Market Surveillance Department.
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