ENTSOG GRIP SNC 2014-2023

3.4 Price Correlation

Price correlation of the European gas hubs is an impor- tant factor because it may be an indication of the actual integration of the related gas markets. Furthermore, price correlation can be considered as one possible, even if not exhaustive, indicator of competitiveness and efficiency of hub gas trading. In fact, the prices of gas on the hubs are expected to tend uniformly in the absence of physical and/or regulatory barriers distortions and in the absence of other factors thwarting arbitrage and competition activities. Therefore, closely parallel price move- ments at the hubs indicate that hubs form a single well-integrated market. Substantially, price correlation may be used as one of the factors indicating whether the hubs may be capable of giving a correct and reliable signal for setting the price of gas sold under long term contracts. Furthermore, efficiency and competitiveness in market pricing can take place only in the presence of hub price correlation. Figure 3.13 (source: ENTSOG) shows the day-ahead price average trends on the South-North Corridor hubs and some other important European hubs. The assessment of hub price correlation leads to think that the European gas hubs form an integrated market and that the correlation among their prices may be the basis for a reliable gas price reference in Europe. This also suggests that EU gas hubs may represent a benchmark for gas pricing in Europe. In fact, even if the EU gas hubs show different levels of liquidity, price correlation is high and, moreover, is getting higher and higher.

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South-North Corridor GRIP 2014–2023

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