22 Nov 2022 20:57

European Commission proposes cap on month-ahead gas futures of $3,000/thousand cubic meters, price seen for only week in all history

MOSCOW. Nov 22 (Interfax) - The European Commission has proposed setting a price ceiling on gas on the Dutch Title Transfer Facility (TTF), the European price benchmark, of around $3,000 per thousand cubic meters, as 275 euros per megawatt-hour is $2,922 per thousand cubic meters at the current exchange rate, on the most popular contract, the month-ahead contract.

This ceiling has only ever been exceeded on the European gas market over five days on such contracts, from August 22 to August 26.

It was this price peak that has been taken "as the reference for the excessively high prices which this proposed mechanism aims to prevent," the European Commission said in a statement.

December TTF futures are currently being traded on the ICE Futures exchange at 122 euros per MWh, or $1,300 per thousand cubic meters.

Another market price ceiling in Europe could be the indicative price of LNG imports, it said.

The commission is proposing an "instrument to automatically intervene on the gas markets in case of extreme gas price hikes."

"The mechanism would be triggered automatically when both of the following conditions are met: the front-month TTF derivate settlement price exceeds 275 euros for two weeks; TTF prices are 58 euros [$616 per thousand cubic meters] higher than the LNG reference price for ten consecutive trading days within the two weeks," the statement said.

"When these conditions are met, the Agency for the Cooperation of Energy Regulators (ACER) will immediately publish a market correction notice in the Official Journal of the European Union [...]. The following day, the price correction mechanism will enter into force, and orders for front-month TTF derivatives exceeding the safety price ceiling will not be accepted," the statement said.

"The market correction mechanism can only be activated as of January 1, 2023," the statement said. "The mechanism can be suspended at any time, either automatically or by a commission decision," if there are risks to the security of supplies of financial stability, it said.

"To help avoid security of supply problems, the price ceiling is limited to only one futures product (TTF month-ahead products)," the statement said.