The European Commission will set a gas price ceiling without a ceiling: Brussels is afraid of losing LNG

Greater Middle East (, - The European Commission has decided on the gas price ceiling. He turned out to be very tall. During the energy crisis, this price or higher was traded for only one week in August, when German companies bought up any gas to fill storage.

The European Commission has decided on the level of restriction of gas prices. The ministry said in a statement that the price restrictions will come into effect when the price of a month ahead deliveries (TTF futures) reaches almost $2,900 per 1,000 cubic meters and stays at that level for two weeks.

The energy crisis has already been going on for more than a year, and gas exchange quotations were at this level for only a week - in August, when German companies bought any gas with state loans to fill storage facilities. The current month-ahead delivery price was $1,250 today.

At the same time, price restrictions will come into effect automatically only if the second condition is also met - the difference between the price of deliveries a month ahead (TTF futures) and the reference cost of spot LNG for the Mediterranean Sea and Northern Europe reaches $ 600 per thousand cubic meters.

Aleksey Grivach, deputy director of the National Energy Security Fund (NESF), doubts that the price of LNG in Northwestern Europe could be higher than the TTF index by $600 within two weeks.

Thus, the gas price limit from the European Commission may not have a ceiling at all, since it will be extremely difficult to comply with all conditions. And in this situation, it seems that Brussels is more concerned not so much with prices, but rather with both giving the promised limit and not scaring off suppliers of spot liquefied gas, which will focus on profitability.

“They could not refuse this measure for ideological reasons, but really limit prices - for reasons of energy security,” notes the deputy director of the FNEB.

In fact, the proposed peak price for gas, which was reached in the summer, adds independent industrial expert Maxim Khudalov. “Probably, the European Commission is trying to fulfill its promises to introduce a ceiling at a level that is hardly achievable. Thus, the restriction does not infringe on the interests of suppliers, so the risk of the latter refusing to supply gas to the EU is minimal,” the expert says.

As reported, the European Commission has prepared the parameters of the price corridor that will be applied to the gas price in order to prevent its sharp increase. Initially, the European Commission announced the introduction of a price corridor to wholesale gas prices for next day delivery. However, now they will limit the wholesale prices of deliveries next month. We are talking about TTF futures. This option was chosen because spot price restrictions threaten the liquidity of short-term markets and the security of supply, the authors of the document explain. They offer a static price cap, but with dynamic elements: a monthly limit review with the possibility of a complete cancellation in case of unforeseen problems with the stability of supply.

At the same time, there will be no price cap on OTC transactions, as they are difficult to monitor. The price corridor is planned to be established temporarily - for one year.

EU countries have filled their storage facilities by an average of 95%, but UGS facilities are not the only source of gas that provides the heating season. Constant current supplies are no less important, and previously Gazprom provided most of them, which is capable of dramatically increasing supplies depending on demand. Alternative suppliers cannot do this, nor can they fully compensate for the reduction in pipeline gas supplies from Russia. Therefore, with insufficient reduction in consumption, wholesale gas prices may again return to record prices in the midst of winter and cold weather.

The European Commission will set a gas price ceiling without a ceiling: Brussels is afraid of losing LNG