Romanian front-month gas more than €2.00/MWh cheaper than Austria

Most November-delivery natural gas contracts executed in the last week in Romania were more than €2.00/MWh cheaper than the front-month market at the Austrian VTP, data from the BRM bourse shows.

According to trades data from the Romanian exchange, November ’17 dealt four times on the STEG continuous-trading platform in a New Lei 76.50-77.50/MWh range, equivalent to €16.67-16.89/MWh. The deals, which together were for total volume of 75GWh, were on average €2.19/MWh cheaper than the VTP assessments on 16-18 October.

Traders CEZ, MET and WIEE were on one side of each of the trades.

A much larger November ’17 contract was also auctioned through BRM at New Lei 77.89/MWh, putting the 120GWh deal at a €1.88/MWh discount to the same product in Austria. Incumbent Romgaz was the seller of the gas.

Price spreads

While Romania and Austria are not directly linked, some shippers in Bucharest use the VTP as a benchmark for their own pricing.

But for a counterparty to make money on the locational spread, Romania and neighbouring Hungary would need to be better interconnected. This is because a counterparty could also sell directly into the Hungarian MGP hub – which for November ’17 is more expensive than VTP – but CEEGEX bourse data suggests the front month did not trade last week.

Romanian prices, while having some degree of correlation to the VTP and MGP, and therefore indirectly the TTF, can also follow local fundamentals as most of the gas is produced and consumed domestically.

In the ten days to 19 October, some 185GWh was dealt through BRM in a range of near-curve and Balance-of-month products. Through auctions 132GWh was also transacted.

Month-to-date, total volume through both platforms has reached 594GWh, notably lower than the 7.87TWh dealt in the whole of September. Typically, liquidity at BRM is heavily skewed to the last week of any given month, so October volume is likely to increase in the coming week.

Prompt trade

In the last ten days, the Romanian Day-ahead discount to the Austrian hub has been even wider than on the front month, data from the OPCOM bourse suggests. While Day-ahead on Friday closed at New Lei 73.02/MWh – putting it at discount of €2.57/MWh to the VTP – in the last fortnight the spread peaked at €3.00/MWh. This was on 17 October.

The cheapest outright Romanian Day-ahead price in the last ten days was on 10 October, with the contract settling at New Lei 72.41/MWh. Local fundamentals do not appear to have pressured the prompt market as on this day Romanian consumption was at its highest so far this winter, at 28 million cubic metres, according to Transgaz operator data.

While OPCOM hosts a Day-ahead screen – which remains in a testing phase – and almost all other bourse trade takes place on BRM, shippers remain unsure as to where liquidity will be centred in the future.

The Romanian parliament, as well as the European Commission, earlier this month rejected a proposal from the legislature’s industry committee for 70% of all gas trade to take place on OPCOM with the rest permitted to take place bilaterally (click here to read story).

Most shippers prefer to trade either over-the-counter or through BRM. tom.marzec-manser@icis.com