Markovic: Gas Storage Full, Price Still 77 Euros

Gas prices on European exchanges stand at around 77 euros per megawatt hour, down slightly from a spike to 80 euros a few days ago, but still high enough to remain the biggest challenge for Serbia’s energy sector heading into winter. That was the assessment on September 18 from energy expert Zeljko Markovic, who added that Serbia’s gas storage facilities are completely full and that, on that front, the country can expect a calm start to the heating season.

At the same time, Markovic warns that the region is also watching a fresh jump in the price of oil, which has again crossed 100 dollars a barrel. He says the market reacts very quickly to every piece of news from the Middle East, above all to the status of transport through the Strait of Hormuz.

Oil Above $100: Why the Market Is Nervous Again

Markovic points out that markets have already been through a similar pattern before, one in which a price spike eases as soon as a solution looks possible:

We had some spikes in oil prices before, and then things calmed down somewhat, as everyone expected a solution in the Strait of Hormuz, that is, in the Middle East. And then, quite literally, the exchanges react to whatever happens, as it happens.

The strait carries a significant share of the world’s seaborne oil transport, so any announcement about its blockade or reopening immediately moves prices. Saudi Arabia, Markovic says, is trying to reduce its exposure to that risk:

Saudi Arabia is trying to redirect part of its transport back through the Strait of Hormuz, but the situation with large ships passing through changes from month to month.

He adds that oil infrastructure damaged in earlier attacks in the Middle East still has not been repaired, and that there are no official estimates of when repairs might be finished.

Could Oil Prices Reach $150 Again?

Asked whether a barrel could climb back to 150 dollars, Markovic says that depends mostly on how the situation develops in the Middle East and in Russia. He recalls that earlier forecasts had predicted prices would calm down by summer, which did not happen. A condition for prices to fall does exist, he says, but it depends on circumstances Serbia does not control:

If some calming down happens, if normal traffic through the Strait of Hormuz is restored, then there is no reason those prices would not start to gradually fall.

Diesel Prices Rising Faster Than Oil as Russia Turns Importer

Markovic points out that diesel prices have risen considerably faster than the price of crude oil. According to him, that is being driven by damaged refineries in the Middle East, but also in Russia, which used to supply part of Asia’s demand for that fuel:

Russia has not only banned diesel exports, it has even started appearing as an importer. It no longer produces enough, because almost all of its refineries have been damaged in one way or another.

In the original conversation, Markovic also adds that diesel matters more for a country’s functioning than gasoline, since it is used far more heavily in industry, heavy transport and other strategic sectors, including defense. That is why any disruption in diesel supply carries a broader economic effect than a rise in gasoline prices.

NIS License Expires September 30, No Signal of an Extension

One of the open questions facing Serbia is whether the operating license of Naftna Industrija Srbije (NIS) will be extended; it expires on September 30. Markovic says there is no information so far about how that story will end:

We have no signals at all, nor any official statements, about whether something will happen, about whether that agreement will actually go through.

He adds that he expects the situation could stay unchanged and that Serbia will get yet another extension, similar to previous cycles.

Gas at 77 Euros: The Effect on Electricity and the Economy

When it comes to gas, Markovic singles out the high price itself as the main challenge for the coming winter. In recent days the price has climbed above 80 euros per megawatt hour, and now stands at around 77 euros. At the current gas price, he says, producing electricity in gas-fired power plants costs more than 250 euros per megawatt hour, considerably more expensive than production from other sources.

Forward prices for gas deliveries in the first quarter of 2027, and for the entire coming year, are 20 to 30 percent higher than last year’s forecasts. That, Markovic explains, could push up prices for businesses on the commercial market, since most of those costs ultimately get passed on to electricity and gas consumers.

On the other hand, Russian gas remains cheaper for Serbia than market prices: according to Markovic, the price is about a third lower than what was being paid on the open market in the recent period. He expects the short-term, three-month extensions of the gas supply agreement to continue, the same pattern that applied in previous cycles.

Low Danube Water Levels Still Weigh on the Region

Markovic also mentioned the effect of low Danube water levels on electricity production in southeastern Europe, including earlier problems with cooling nuclear power plants that draw water from the river. Electricity production in Serbia is currently sufficient for consumption needs, he says, and the situation is somewhat better than over the summer, but water levels still have not fully recovered. A real recovery, he explains, requires a stronger inflow of water in the river’s upper course:

For that to happen, there first needs to be an inflow of water in the upper basin of the Danube. It needs to rain a lot up there for us to see anything change down here.

Srpske Novine reported on September 17 on the price of a barrel dropping to 103 dollars and on announcements that Aramco would repair the damaged pipeline within a few days, an episode that shows how quickly energy prices move in both directions, up and down alike. The next signal will be the actual implementation of the gas agreement with Russia and the final decision on the NIS license, both expected before the end of September.