Today, ACER releases its third quarterly review of key developments in European gas wholesale markets as part of its 2024 Market Monitoring Report (MMR). The first and second publication were issued respectively in March and July 2024.
The report finds that despite supply uncertainty re-emerging, Europe avoided severe gas price volatility in Q3 2024. What’s novel in this quarterly edition is the new focus on the evolution of cross-border gas transport tariffs, which have been rising in recent years.
- Gas prices: In Q3 2024, European gas wholesale prices rose but remained less volatile than last year due to increased Norwegian supply, healthy storage levels, and low demand.
- Price integration: Price integration across most EU gas hubs remained consistent, although some divergence occurred due to the rising German storage levy.
- Gas demand: Stagnant household demand and a modest increase in industrial demand were outweighed by a reduced call on gas-fired electricity generation, leaving overall EU gas demand slightly lower than in 2023 and well below pre-crisis levels.
- Renewables continue to displace gas generation: Increased renewables’ output limited the opportunities for conventional power plants (gas and coal) to run profitably. This lowered carbon emissions, loosened the EU gas demand-supply balance and reduced instances of gas setting marginal prices in electricity markets.
- Storage: The EU reached its 90% gas storage target ahead of schedule, despite lower year-on-year injections throughout the quarter.
- Transmission tariffs: Gas transmission tariffs have been rising in some EU countries, with little evidence so far of impacting price convergence. More tariff increases are expected in the near-term, warranting monitoring of the effects of tariff changes on cross-border trade and market integration.
What challenges lie ahead?
- The Russian gas transit agreement through Ukraine expires in 2024, pushing Central Europe to seek alternative supply routes.
- If gas withdrawals this winter significantly exceed the previous years, the EU may face increased competition in LNG markets for 2025, potentially driving up wholesale gas prices.
- Several LNG production projects are under construction, but major new LNG volumes are expected only from 2026 onwards.
ACER will continue to closely monitor trends in the European gas markets that could lead to short-term volatility for European energy markets. The next update will be published early in 2025.
