EU energy ministers agree to cap gas prices ahead of winter

CNN Business

Europe has agreed to a cap on natural gas prices, following months of debate over whether the measure will protect European households and businesses from extreme price spikes as temperatures plummet.

In a Monday meeting, EU energy ministers agreed to trigger a cap on the price of month-ahead natural gas futures on the Dutch Title Transfer Facility (TTF) — the bloc’s benchmark gas exchange — to €180 ($191) per megawatt hour if it exceeds this level for more than three consecutive working days.

The cap will also apply to three-month and year-ahead gas trades, and it will remain active for at least 20 working days once triggered. It is planned to come into force as of February 15 of next year.

“We have the deal,” Jozef Síkela, deputy prime minister for the Czech Republic, said at a Monday press conference. The Czech Republic currently holds the presidency for the EU Council.

The price ceiling is much lower than the €275 ($292) per megawatt hour limit originally proposed by the European Commission last month.

The cap would also be triggered if prices hit at least €35 ($37) higher than a reference price for liquified natural gas (LNG) for the same period. Prices for LNG — a chilled, liquid form of gas that can be transported via sea tankers — are tightly linked to prices for Europe’s natural gas delivered by pipelines.

Síkela described the cap as a “temporary, effective [and] realistic mechanism which will protect citizens and businesses from the excessive gas prices we have seen this summer.”

“This is not a fixed cap, but rather a dynamic one,” he added.

The cap is the latest in a raft of measures agreed by the European Union this year to stem an energy crisis sparked by Russia’s invasion of Ukraine that has pushed up prices and fueled the highest inflation in decades.

Gas prices spiked to a record high of around €345 ($367) per megawatt hour in August, after Moscow reduced gas deliveries to the continent. TTF gas futures fell back 5% on Monday to hit €107 ($114) per megawatt hour.

Other EU measures have included gas storage requirements and a price cap of $60 a barrel on seaborne Russian oil.

Despite Monday’s political agreement, analysts and traders remain concerned that the mechanism could backfire –— causing prices to rise and worsening potential supply shocks.

Germany, the bloc’s biggest economy and one of its largest importers of natural gas, had been the most notable holdout before Monday’s announcement.

“Gas traders would likely liquidate short positions and stop selling futures if they fear the break could be activated imminently, for fear of the resulting losses,” analysts at Eurasia Group said in a Monday note.

Following the announcement, a spokesperson for the Intercontinental Exchange, which operates the TTF, said that it had “consistently voiced our concerns about the destabilizing impact a [price cap] will have on the market.”

The spokesperson said the exchange was reviewing the details of the new proposal and “whether [it could] continue to operate fair and orderly markets for TTF from the Netherlands.”

Trading on the TTF will continue to operate as usual for the foreseeable future, they added.

In light of concerns, Síkela said that the cap could be “automatically deactivated” in several instances, including when gas consumption across the bloc is high, if trading on the TTF declines, or if quarterly imports of LNG fall.

The proposal still requires a “qualified majority” to be implemented, meaning that 15 countries representing at least 65% of Europe’s population must agree to it.

Source link

Leave a Reply

Your email address will not be published.

Previous post How to protect your hair during winter? Follow these 7 tips
Next post Putin meets dictator Lukashenko in Belarus fuelling fears ally will join new offensive in Ukraine
How Miles Teller Totally Broke Royal Protocol Meeting Prince William and Kate Middleton Mila Kunis Reveals Why She and Ashton Kutcher Don’t Close Bathroom Doors at Home With Kids Khloe Kardashian and Tristan Thompson Were Engaged for 9 Months Before Paternity Lawsuit Selena Gomez Speaks Out About Kindness After Hailey Bieber’s Tell All Interview Shane Warne’s child, Jackson, shares recordings of ‘harmful ladies despising’ powerhouse Andrew Tate: ‘I really do concur with a couple of the things he says’ Kate and William to greet Americans ‘sleeping on the streets’ amid US visit ‘He said “take your bra off”… I was 15’: Supermodel Kate Moss reveals in unflinching detail how she fled a photoshoot in tears after being targeted by fashion industry predator as a teenager How to get early access to the MultiVersus open beta – usnewspress Gunman kills 3 people in Indiana mall shooting, police say Top 10 sizzling sex secrets to Spice Up Your Sex Life Stellantis Announces Termination of Jeep Venture With China’s GAC Memphis police thwart potential mass shooting at arena: Officials 4 dead after argument between 2 groups leads to shooting at north Harris County apartment complex, sheriff says US soprano, offended by blackface, pulls out of Italy opera 10 Top Romantic Getaways in New Jersey Ricky Martin’s Attorney Says Allegations of a Sexual Relationship with His Nephew Are ‘Untrue’ 8 Best Semiconductor Stocks To Buy Amid a Global Chip Shortage : USA Le’Veon Bell Reflects on Lost Season With Steelers in Retirement Post Updates on Tiger Woods from Round 1 of The Open PETE ALONSOI’M DEALING W/ ‘PRETTY BAD PTSD’… Over March Car Crash