The resurgence of gas trading volumes across Europe signals more than renewed market liquidity. It underscores a deeper reconnection between gas and power prices—a linkage with direct consequences for Southeast Europe (SEE), where gas often sets the marginal price during stress periods despite relatively low average usage.
In Central and Western Europe, gas trading liquidity provides a transparent hedging reference for power markets. In SEE, the relationship is more complex. Gas-fired generation is limited in Serbia, Bosnia and Herzegovina, and Montenegro, yet gas prices still influence regional power costs indirectly through imports from Hungary, Romania, and Greece, where gas units frequently sit on the margin.
Hungary is again pivotal. Its gas-fired fleet anchors peak pricing and transmits gas market movements directly into power spreads affecting Serbia and Croatia. When gas prices rise, Hungarian power prices follow, pulling up Serbian imports even if domestic coal or hydro remains available. This makes gas hedging indirectly relevant for Serbian power portfolios.
Romania represents a hybrid case. Domestic gas production cushions price spikes, but export-linked pricing means Romanian gas costs still respond to broader European dynamics. When Romanian gas plants set the marginal price, their influence extends southward into Bulgaria and Serbia, reinforcing the gas–power link despite limited physical gas trade in those countries.
Greece intensifies this effect. Gas-fired plants dominate evening and low-renewable periods, making Greek power prices highly sensitive to gas volatility. Cross-border exports during these periods effectively transmit gas price risk into Balkan markets, particularly North Macedonia and Bulgaria.
For SEE traders, this evolving reality reshapes hedging strategies. Power-only hedging is no longer sufficient. Even markets with minimal gas generation must account for embedded gas price exposure in imports. Conversely, gas traders increasingly monitor power spreads as a proxy for regional demand shifts.
Serbia’s strategic challenge lies in managing this indirect exposure. Without deep domestic gas-to-power coupling, market participants often underestimate gas risk until it materialises through imports. Sophisticated portfolios now hedge gas and power jointly, using Hungarian or Romanian benchmarks as proxies.
Montenegro and Albania, while structurally less exposed, feel gas influence during regional scarcity events. When gas-driven prices spike in Greece or Bulgaria, hydro exports become more valuable, but domestic consumers may face higher import costs if hydrology disappoints.
The key implication is that SEE markets are becoming financially coupled to gas, even where physical coupling remains limited. Traders who recognise this early can structure more resilient hedges, while those treating power in isolation face rising volatility. In the next phase of SEE market evolution, gas is not disappearing from power pricing—it is becoming more selective, sharper, and strategically important.
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