European Union leaders could support plans to launch a new gas price benchmark at next week’s meeting in an attempt to lower energy prices for consumers and industry.
The meeting of EU leaders is scheduled for October 20-21, after Brussels would propose additional measures to control the energy crisis, which has led to an increase in inflation and is affecting the economies of the EU bloc, according to a document consulted by Reuters, reports Agerpres.
A draft of the meeting’s conclusions, seen by Reuters, indicates that EU leaders will agree “to develop a new reference index that more accurately reflects the conditions on the gas market“.
Liquefied natural gas (LNG) buyers typically use benchmarks such as the Henry Hub for natural gas prices in the United States or the Japan Korea Marker (JKM) in Asia. In Europe, the standard benchmark is set at the Title Transfer Facility (TTF) hub in the Netherlands, used for both pipeline and liquefied gas.
Brussels claims that a new index is needed, given that the one established in Amsterdam is determined by pipeline supply and no longer represents a market in which more LNG is included.
European LNG imports have hit a record high this year as governments scramble to find alternatives to Russian gas that, if completely phased out, would require shipments of 200 million tonnes of LNG over the next decade, analysts estimate.
While the price of LNG is generally higher than that of natural gas, infrastructure constraints in pipeline networks and variable capacity to receive and process the chilled fuel have led to a change in transactions in some European hubs, which has caused major price divergences.
For several weeks, EU leaders have been debating a possible gas price ceiling.
After a meeting of European energy ministers on Wednesday, European Energy Commissioner Kadri Simson said it was not yet known whether there was enough support for capping the price of gas used to generate power to be added to future EU proposals, a decision backed by countries like France and Romania.
Other measures to be considered by EU leaders aim to coordinate the filling of member states’ storage facilities ahead of next winter and speed up negotiations with gas suppliers outside Russia in an attempt to lower prices. Such negotiations can be carried out with the help of the countries that buy gas jointly, in order to benefit from “their collective political and market importance“, the document consulted by Reuters states.
However, some market participants remain skeptical.
“TTF is still, by far, the most liquid gas market in Europe and therefore the most representative. If you filter LNG from TTF markets, liquidity will decrease, there are huge risks or even higher volatility, then possibly large price fluctuations“, said Hans van Cleef, economist at ABN Amro.
Tags: European Union, gas pipelines,
Publication date: 14-10-2022 09:02
Top fighters come to the OSS Fighters Gala in Constanța
Putin’s war also causes “victims” in Germany: a large part of society believes that Russia “should” have invaded Ukraine
Former KGB agent, on Russia’s nuclear threats: “Putin is not a suicide bomber, he wants to live”