He pointed out that in the summer, natural gas traders’ desire to build inventories for the winter with diminishing supply opportunities created much further pressure on prices. “The price peak was reached in August, when the desire to buy gas for stocks was greater than the ability to cover the supply. However, when the gas storage filling statistics were released, the price fell sharply and each subsequent announcement or geopolitical event had less and less effect on the price fluctuations, as the level of inventories was sufficient to stabilize the price.” said Miķelsons.
He also recalls that in October and early November in Latvia, as well as in other parts of Europe, the weather was significantly warmer than in other years, which further reduced gas prices, as direct demand from part of the traders and the guarantee of the heating season have not been so great. “Since mid-November, when the cold came, prices have risen again, but they are not as high as they were in August and early September,” added the executive director of PUK, explaining that the price fluctuations of gas are mostly explained by additional supply and demand constraints as well as climate fluctuations.
He points out that while it is difficult to predict demand in the remaining winter months, the current weather conditions in December did not lead to a significant increase in natural gas prices. “Therefore, we can expect that there will not be a significant increase in the coming winter months. As for the price drop, it depends on the outside air temperature. Yes, some months will be relatively warmer, so in general the prices on the stock exchange will be lower, because during the period when demand decreases, it pushes down the price of direct delivery,” Miķelson said.
He stressed that there will be no technical problems with natural gas supplies in the Baltic region until the end of winter, as new terminals have been built and will start operating in the near future. On the other hand, natural gas prices will not be determined by Baltic-scale factors, but by European and world markets, for example, a large part of liquefied gas prices depends on demand in Asia, where China’s situation in relation to pandemic restrictions and economic development trends are evaluated very differently.
Miķelsons pointed out that the increase in energy prices affected the services provided by all sectors regulated by the PUK. The increase in the prices of energy resources has so far had a significant impact on operators in the thermal energy sector, who, taking into account the evolution of the fuel market, must review their service tariffs more often in order to cover the costs of provision of services. As long as the prices of energy resources remain high, the tariffs of regulated services will also be higher, admitted the executive director of the PUK.
“A positive development for users is that the tariff calculation approach established by the PUK foresees a gradual reduction of tariffs when energy resource prices fall. Merchants have the right to revise tariffs when costs rise, but they are obliged review tariffs when costs fall.For example, the drop in the market price of natural gas observed in November had a positive impact on some of the heat tariffs of traders, whose natural gas price changes every month or the contract is concluded at a fixed price for a short period of time,” Miķelsons said.
