EU head's compromise keeps Commission gas price cap plan alive
Quantum Commodity Intelligence - The European Union (EU) has moved a step closer to plans to limit natural gas prices with a ceiling, with heads of state telling the Commission to formalise plans for a "dynamic price corridor" as the bloc struggles with its energy security heading into winter.
Discussions ran late into the night, only wrapping up at around 0200 local time on Friday morning and appeared to show a shift in tone from Germany and the Netherlands towards the 15 EU members that had led on the proposal.
Those 15 members – including France, Italy, Spain, and Belgium – also softened their stance as they attempted to get the bloc to negotiate collectively on supply agreements, cut demand, and shift the continent's benchmark away from volatile Dutch TTF futures to a new pricing mechanism.
Germany and the Netherlands have been high-profile holdouts on the move, arguing that a price cap on gas would distort market signals and only further complicate the continent's precarious energy security situation.
While no definitive agreement was reached, the EU leaders asked their ministers and the Commission to go back and submit formal proposals on a "temporary dynamic price corridor on natural gas transactions".
"The next two or three weeks will allow the Commission to come up with these mechanisms," French President Emmanuel Macron told reporters Friday.
Shift
Natural gas prices have been volatile throughout the year, with Dutch TTF futures hitting an all-time highs in August as European buyers scrambled to fill storage tanks before winter.
The Nov22 contract retreated over 10% Friday to around four-month lows of €113/MWh, down almost 70% from the contract high of over €350/MWh in late August, which was an oil equivalent of more than $500/b.
Market watchers said European gas reserves are close to storage capacity, so importers have little scope to buy more LNG until weather-related demand starts to kick in and draw down inventories.
Russian imports made up about 40% of European gas supply before the war in Ukraine, although that has slumped to less than 10% as buyers shift attention to LNG cargoes as an alternative.
The move to limit gas payments to Russia is part of a wider attempt to punish Moscow for its invasion of Ukraine, with successive rounds of sanctions hoping to squeeze Russian revenues to alter its behaviour.
The gas plan follows moves in the oil market that has seen Western states commit to ending Russian crude and product imports, with the G7 leading plans to restrict Russian access to finance, insurance, and shipping when oil prices rise above a certain threshold.
