London
CNN
–
Europe agreed to a Natural gas price ceilingafter months of debate over whether the measure would protect European households and businesses from a sharp rise in prices as temperatures drop.
At a meeting on Monday, the EU energy ministers agreed to A cap release if a month ago the price of a natural gas futures contract at the Dutch Transfer Facility (TTF) – the benchmark gas exchange for the bloc – exceeds €180 ($191) per MWh for more than three consecutive business days.
The next month’s TTF price must also be €35 ($37) higher than the reference price of liquefied natural gas (LNG) for the same period for the cap to be activated. Prices for liquefied natural gas – a refrigerated liquid form of gas that can be transported by sea tankers – are closely linked to prices for natural gas in Europe delivered by pipeline.
The cap will be applied to gas contracts traded in all European trading centers for one-month, three-month and one-year supplies. Once operational, prices over €35 above the reference price for LNG will not be allowed, based on transactions in global markets. The cap can be activated from February 15 next year.
“We have reached the agreement,” Josef Sekela, deputy prime minister of the Czech Republic, said at a press conference on Monday. The Czech Republic currently holds the Presidency of the Council of the European Union.
The price cap is much lower than the €275 ($292) per megawatt-hour limit proposed by the European Commission last month.
Sequila described the cover as “temporary and effective.” [and] A realistic mechanism that protects citizens and companies from the exorbitant gas prices that we witnessed this summer.
He added, “This is not a static cap, but rather a dynamic cap.”
The cap is the latest in a series of measures agreed by the European Union this year to stem an energy crisis triggered by Russia’s invasion of Ukraine that has sent prices soaring and fueled The highest inflation rate in decades.
Gas prices jumped to a record high of around 345 euros ($367) per megawatt-hour in August, after Moscow cut gas shipments to the continent. TTF gas futures fell 5% on Monday to 107 euros ($114) per megawatt hour.
Other EU measures included Gas storage Requirements and a Ceiling price $60 a barrel for Russian oil transported by sea.
Despite Monday’s political deal, analysts and traders remain concerned that the mechanism could backfire – causing prices to rise and worsening the odds. supply shocks.
Germany, the bloc’s largest economy and one of its biggest importers of natural gas, was a prominent holdout ahead of Monday’s announcement.
“Gas traders are likely to liquidate short positions and stop shorting futures contracts if they fear the breakout will be triggered soon, fearing the resulting losses,” analysts at Eurasia Group said in a note on Monday.
After the announcement, a spokesperson for Intercontinental Exchange, which operates the TTF, said it had “consistently expressed our concerns about the destabilizing effect”. [price cap] It will be on the market.”
The spokesperson said the exchange is reviewing the details of the new proposal and “whether [it could] Continue to operate fair and orderly markets for TTF from the Netherlands. ”
They added that trading on the funds will continue to operate as usual for the foreseeable future.
In light of the concerns, Síkela said the cap could be “automatically deactivated” in several cases, including when gas consumption across the bloc is high, if trading on the fund of funds is down, or if quarterly LNG imports are down.
The proposal still requires a “qualified majority” to be implemented, which means that 15 countries representing at least 65% of Europe’s population must agree to it.
“Explorer. Unapologetic entrepreneur. Alcohol fanatic. Certified writer. Wannabe tv evangelist. Twitter fanatic. Student. Web scholar. Travel buff.”
