Cold Nov weighs on Bulgarian gas liquidity

Market: Natural gas
19/12/24

Cold weather across the Balkan region in November might have triggered southeast European gas buyers to increase nominations under their long-term gas contracts, leaving less available gas to trade on Bulgaria's Balkan Gas Hub (BGH).

This fluctuation in Bulgarian trading activity in the wider Balkan region is part of a larger trend that could persist in the coming months.

BGH liquidity dropped in November from October — traded day-ahead volumes averaged just over 40 GWh/d, down from 66 GWh/d in October. And this trend has continued into December, with traded volumes at about a third of their October level.

Daily lows in Bulgaria's capital Sofia moved below freezing in early November and cold weather persisted for almost the entire month, after temperatures had been about 3°C on average in the second half of October. Bulgarian demand consequently increased, rising to 106 GWh/d in November from 77 GWh/d in October and about 94 GWh/d in November 2023 (see graph).

The same weather patterns boosted demand across the Balkan region, supporting prompt prices in Romania and Greece and attracting more supply. Gas demand from the Romanian distribution network was up to 296 GWh/d in the first half of November from 187 GWh/d in the same period last year. And Greek imports almost doubled to 190 GWh/d in the same period, as the country's gas-fired power generation climbed.

This jump in Balkan demand pushed up the region's prompt prices. Volume-weighted average prices on the Greek Henex exchange rose by more than €15/MWh in just two weeks. The Argus Romania VTP everyday price was €42.80/MWh on 15 November, up from €33.67/MWh on 1 November. And while Bulgaria widely remained the lowest-priced market in the region after Turkey, the BGH volume-weighted average price was up to almost €47/MWh near the end of November from about €34/MWh at the beginning of the month.

This jump in regional demand might have pushed direct Gazprom buyers to use their contracts in full, leaving less available gas to sell on the Bulgarian spot market (see graph). Russian inflows at the Strandhza 2/Malkoclar point were 511 GWh/d in November, up from 442 GWh/d a year earlier.

At the same time, the start of contractual Azeri deliveries to Serbia has further reduced available Azeri gas to sell on the spot market. Outflows to Serbia from Bulgaria through the Interconnector Bulgaria Serbia (IBS) have held at 12 GWh/d since the beginning of November. Serbia's Srbijagas has a contract with Azeri state-owned Socar for up to 1mn m³/d, and an additional shorter-term deal for up to 1mn m³/d in November 2024-March 2025. Socar has been the only user of the IBS this year so far, based on data it released earlier this year on sales to Serbia, which perfectly matched pipeline flows.

Socar and Turkish state-owned Botas have a transfer agreement since June this year, which has supported direct flows to Bulgaria from Turkey at Strandzha 1/Malkoclar. And flows through this point increased over the course of November, although Turkey's increased demand might have slowed outflows down.

By Ugur Yildirim

Bulgaria's implied demand with temperatures

Traded volume with price

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