Natural Gas Prices Rise after EU Energy Ministers agree on Price Cap
- After the price cap agreed by EU energy ministers on Monday, both US and European natural gas prices fell.
- The cap will kick in if prices stay above 180 euros per megawatt hour for three consecutive days.
- “Today’s agreement shows that Europe is not willing to pay any price to get gas and that it can act together to ensure its energy security.”
Monday’s fall in European natural gas prices was due to the agreement of EU energy ministers to a price cap to protect consumers from a volatile market.
The EU price cap applies if prices rise above 180 euros per megawatt-hour for three consecutive days starting February 15. Prices must also rise 35 euros above a predetermined reference gas level.
“Today’s agreement clearly signals that Europe is not prepared to pay any price for gas and that it is able to act united to ensure its energy security,” EU Energy Commissioner Kadri Simson said.
The European benchmark for natural gas, Dutch TTF TTF natural gas futures, fell 7% to 106.95 Euros per megawatt-hour. In the last week, prices have fallen by around one-third.
Natural gas prices in the US plunged 12% to $5.805 per British thermal unit, making it the top gas supplier since Moscow cut off gas flows to Europe.
The global energy picture has been reordered by Russia’s invasion in Ukraine, which has prompted a crunch to protect reserves. The EU members are at a crossroads about whether a price cap is worth the risk of further choking supplies into 2023, when its energy crisis could be worse than this year.
European energy ministers will also be facing off against Intercontinental Exchange. Intercontinental Exchange is the largest market in Amsterdam. According to the Wall Street Journal ICE threatened last Wednesday to move its market outside the European Union if it was not able to cap prices, according to reports.
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