The Hungarian day-ahead price has flipped to a discount to its Austrian counterparts in recent days, reflecting full storages and strong contractual imports that have reduced the need for spot purchases.
In four of the past six sessions, the Hungarian day-ahead price has closed at a discount to the Austria VTP, with the price on 18 September at €1.13/MWh below. The last time this price dynamic prevailed for several consecutive days was in late January, as the Hungarian market usually needs to retain a premium to Austria in order to attract spot imports to fill its storage facilities and meet peak consumption.
The Hungarian prompt switching to a discount may mean strong spot purchases are no longer a priority, probably the result of high storage levels and low domestic consumption. Hungarian storage facilities were nearly 95pc full as of the morning of 18 September, holding 64.54TWh, according to the latest available data from EU transparency body GIE. This is drastically above last year's figure of 47TWh for the same date and further above the 45.5TWh average for 2013-21.
Low domestic gas consumption this year has buoyed supply available for injections. Cumulatively in January-July, the latest data available from energy regulator Mekh, domestic demand was 17pc below the same period in 2022 and down by 22.6pc from the level in 2021 (see consumption graph), having already dropped 14.9pc last year from a year earlier.
Imports through Romania and Serbia have held at nearly full capacity at both interconnection points for the past two months, averaging 245 GWh/d and 70 GWh/d, respectively, on 1 August-18 September. This was just below technical capacity at the two points of 245.8 GWh/d and 73.4 GWh/d, respectively, giving a utilisation rate of nearly 100pc. Higher flows from Serbia were bolstered by the start of deliveries of 50mn m³ of Azeri gas that was injected into Hungarian storage facilities. And imports from Croatia averaged 37 GWh/d during this period, a utilisation rate of roughly 73pc.
In contrast, imports from Austria plummeted to 66 GWh/d on 1 August-18 September, from 141 GWh/d in July. And since Hungarian prices began flipping to discounts to Austria, inflows have dropped even further, averaging just 11 GWh/d on 14-18 September and as low as 2.9GWh on 14 September. Excluding two days of maintenance in late June, this was the lowest for any day since 23-24 January, which was also the last time Hungarian day-ahead prices were at a discount to Austria.
With an agreement having been reached to import 100mn m³ of Azeri gas in the fourth quarter of this year, and if domestic consumption stays low, there could continue to be little need for brisk imports from Austria. A recent agreement signed between the state-owned Hungarian and Bulgarian suppliers MVM and Bulgargaz also could help bolster winter supply, particularly through co-ordinating LNG purchases through the EU joint-purchasing platform.
Slovakia now Europe's premium market
While Hungarian day-ahead prices have flipped to a discount to Austria, Slovakian prices have maintained a significant premium, making the Slovak market the most expensive of any European market assessed by Argus.
While the Hungarian basis to Austria has fluctuated widely this year, the Slovak market has held at a premium in every session, at an average of €1.56/MWh (see basis graph). It held as high as €1.90/MWh at the end of August, but has shrunk so far this month to an average of €1.60/MWh. Slovakia also sits at the end of a long line of transmission from more liquid hubs in northwest Europe, where the majority of LNG terminals are located and where Norwegian gas enters Europe. Slovak prices, consequently, have to be high enough to offset the greater transit costs associated with bringing gas eastwards across several countries. But the majority of the country's imports still comes from Russia and is delivered through Ukraine.
Slovak prices have been supported by strong imports from Ukraine's state-owned supplier, Naftogaz, which has accounted for most of the increased liquidity on the Slovak market in recent months. Outflows from Slovakia were the largest source of exports to Ukraine this summer.
The large basis to Austria comes despite Slovak storages also being near full capacity and even lower demand this year than last. This may suggest prices on the Slovak VTP are driven more by exports to neighbouring markets than they are by the fundamentals situation in the domestic market.
