Macroeconomic environment

Source: In-house analysis based on data published by the Central Statistical Office and the European Commission.

In 2020, Poland’s GDP fell by -2.8% y/y. As a result of the COVID-19 coronavirus pandemic, the Polish economy faced declining investment activity (-10.9% p.p.) and lower household consumption (-3.2% p.p.). On the other hand, an increase in the level of government spending (0.7 p.p.) and a positive foreign trade balance (0.4 p.p.) helped keep the Polish economy in relatively good shape compared with other European Union countries – according to European Commission data, the recession in Poland was among the lowest, with only Lithuania recording a smaller decline in economic activity (down by -0.9% y/y). Despite the significant downturn, European Commission analysts forecast that the Polish economy should return to pre-pandemic levels in 2021, with GDP expansion forecast at 3.1% y/y

Source: In-house analysis based on data published by the National Bank of Poland (NBP).

The USD and EUR exchange rates are a significant indicator for the PGNiG Group, mainly because of their impact on gas procurement costs in the Trade and Storage segment. The dollar exchange rate mainly affects settlements with gas suppliers in long-term contracts and oil revenue, while the euro exchange rate affects gas purchases from the western direction.

In 2020, prices of natural gas in Europe fell significantly relative to prices quoted at the US Henry Hub. The average natural gas price on the TTF Holdings Hub during this period was EUR 9.35/MWh – a decrease of more than 30% y/y. Comparing the same periods, natural gas prices at the Henry Hub fell by EUR 1.98/MWh to average EUR 5.84/MWh. The average price of gas in the United States was down 25.3% at that time. The spread between those two trading points shrank by almost 39.1% last year, by EUR 2.25/MWh, to an average of EUR 3.51/MWh in 2020. The largest price spread of EUR 9.58/MWh was recorded in December

Source: In-house analysis based on NYMEX and ICE data.

In 2020, the weighted average spot price (on the Day-Ahead and Intraday Market) of gas in Poland was PLN 50.60/MWh, down by PLN 15.86/MWh on 2019. Gas prices in Poland were strongly correlated with those in Germany and on the European markets in general. The average spread between the spot prices (for Day Ahead products) on the PPX and GASPOOL in 2020 was EUR 1.77/MWh

Source: In-house analysis based on PPX and EEX data

Source: In-house analysis based on PPX and EEX data.

The situation on the natural gas market in Europe and globally has a bearing on the PGNiG Group’s financial results, mainly due to its impact on both income and expenses of the Trade and Storage segment.

Oil prices collapsed in the first quarter of 2020. The coronavirus pandemic led to the imposition of restrictive measures in many countries, leading to a fall in demand. Towards the end of the quarter, a price war between Russia and Saudi Arabia also began, the aim of which was to drive down oil prices. In the second quarter, the two sides came to an agreement, but demand fell even more sharply (especially in April) which led to very significant oversupply. The parties’ agreement to cut production meant that the situation in the oil market gradually improved throughout the rest of the year.

In the third quarter, the average monthly price was in a narrow range of USD 40-45/bbl, and in November and December the prices rebounded. News of the emergence of a vaccine for the coronavirus and the ordering by many countries of bulk quantities of the vaccine translated into a rise in the price of Brent crude oil, which reached USD 50 per barrel, its highest level since February.

Source: In-house analysis based on ICE and NYMEX data

Average oil demand in 2020 fell 8.86% from the previous year, at 92.22m barrels per day. Oil demand among the world’s largest non-OECD (Organisation for Economic Cooperation and Development) consumers fell by 6.28%. Other Asian countries also saw a decline in demand. The global oil supply was reduced in 2020 by 6.31% year on year. The output from the OPEC group fell most sharply, by 11.72%. Only China increased production, by 0.82%, while the countries of the former Soviet Union reduced their supply by 1.15%.

The situation on the oil market in Europe and globally has a bearing on the PGNiG Group’s financial performance, mainly due to its impact on the Exploration and Production segment (chiefly sales of crude produced in Norway) and the cost of gas imports in the Trade and Storage segment.

* Reference point for temperature measurement: Rzeszów.
Source: In-house analysis based on Wholesale Trading Branch data.