However, analysts and market participants questioned whether the cap would achieve that objective.
“My view is that this likely will not translate into savings for consumers … In some cases, it could increase prices,” said Jacob Mandel, senior associate at Aurora Energy Research, pointing to the various ways companies Will be able to hold trading gas. at prices above the cap.
‘purely political’
One such route would be for traders to switch contracts.
The EU price limit on the Title Transfer Facility (TTF), the main Dutch gas trading hub in Europe, applies to front-month, three-month and front-year contracts, but companies can choose to buy gas on intraday or day-ahead gas. Shifts can happen. contracts, which will not face EU price limits.
Companies could also move their gas trading away from energy exchanges, where EU price caps would apply, and conduct private transactions instead. The EU cap will not initially cover these “over-the-counter” (OTC) trades, although the bloc will review next year if they should be included.
Most large European consumers’ liquefied natural gas (LNG) trades are already OTC, meaning they will not be affected by the EU cap, according to estimates by SEB Markets.
“The price cap is purely political and today we would say it is largely irrelevant,” said SEB analyst Ole Hvalby.
The European Commission proposed the gas price cap last month, following calls from around 15 countries for the measure, and resistance from a handful of others. European gas prices hit a record high of above €340/MW in August, the highest price ever this year driven by Russia cutting off most of the gas sent to Europe.
Some analysts said the conditions that led to this surge – declining Russian gas supplies and the ability to quickly replace it – are unlikely to be repeated given the rapid expansion of Europe’s LNG import infrastructure.
Germany, Europe’s biggest gas consumer, opened its first floating gas terminal on Saturday, with more to come in the next year. Countries including the Netherlands and Poland are also expanding LNG infrastructure.
“We are less likely to see a situation where the TTF trades at a higher premium than the LNG price. As such, it is also making it less likely that you will see the actual cap activated,” said Sindre Knutsson, Head ” of energy markets at Rystad Energy.
A third option to avoid the EU cap would be for traders to move to other gas markets. The EU price cap applies to EU hubs, but not those outside the bloc, such as Britain’s National Balancing Point (NBP) trading hub.
The Intercontinental Exchange, which hosts TTF trading in Amsterdam, has also threatened to move the platform outside the EU to avoid the cap.
high cost
It is difficult to assess whether the cap would have prevented price increases this year.
Front-month TTF prices met at the price level needed to trigger the EU cap on about 40 days this year. But the trigger also requires prices to be 35 Euro/MW higher than the LNG reference price, which comprises an average of different LNG pricings.
The EU has tasked energy regulators with calculating that price, but only since February.
“Given the build-up in LNG infrastructure, it is difficult to see 40 days of a cap,” said Ben Wetherall, director of market development at ICIS.