Gas markets slide as EU closes in on watered down price cap
Gas prices are heavily down across UK and European benchmarks, as the West pushes for a price cap on Russian supplies.
UK Natural Gas Futures have slumped 11.9 per cent, while the Dutch TTF Future benchmark is down 12.6 per cent.
The European Commission is set to propose a last-resort “dynamic” price cap for natural gas in the European Union (EU).
This would mean mandatory limits on the degree to which traded prices can fluctuate in a single day, according to a draft proposal seen by news agency Reuters.
The EU executive would “as a last resort” propose establishing a market “dynamic” price at which natural gas transactions can take place in the spot market.
The draft argues that the measures should not affect security of supply, nor lead to an increase in gas consumption, nor affect the orderly functioning of energy derivative markets.
EU governments would have to agree to this unanimously, and it would last for no longer than three months.
EU finally settles on price cap proposals
The proposal is a significant breakthrough for the EU, following months of bickering.
However, the likely agreement is short of the EU-wide gas price cap which 15 member states had been pushing for, which had been opposed by Germany, Austria and the Netherlands over concerns of shortages and failures to incentivise saving energy.
The EU is also floating the idea of joint gas purchases, a solidarity mechanism to avoid sharp disparities in supply across the bloc and a push to reduce gas demand.
The bloc is desperate to tame energy costs and slash Russian war revenues following the country’s invasion of Ukraine.
Gazprom has been gradually cutting the bloc off from its supplies over the past few months, initially with rouble requirements for its supplies before later halting gas flows via the Nord Stream pipeline over alleged maintenance issues.
The EU has been racing to top up storage, which has reached over 90 per cent of capacity heading into winter, and has announced planned phase outs of Russian coal and seaborne oil shipments.
Leaders are set to debate the EU’s options later this week.