MNI BRIEF: European Commission Proposes Ceiling On Gas Futures

The European Union could set a maximum ceiling for month-ahead TTF Dutch gas futures price and will avoid a ceiling on spot, over-the-counter or day-ahead prices, under European Commission proposals revealed on Thursday for discussion at next week’s energy ministers’ meeting.

The mechanism would be triggered if benchmark month-ahead TTF prices are above a pre-determined and pre-announced level for a certain number of weeks and the spread between spot TTF and spot LNG prices exceeds a specified ceiling for a set number of days, the Commission said.

Such a cap would help contain the retail price impact of dearer gas, assisting the European Central Bank's fight against inflation. (See MNI SOURCES: ECB Weighs 50 In December, Hawks To The Fore)

Activation of the “safety ceiling” would be automatic if these two triggers are met and will be deactivated as soon as these conditions disappear. The tool would deter excessive speculation and volatility and help shape price expectations, the Commmission said.

It would be reviewed every month by the Commission and could be suspended should it cause unintended consequences, such as disruption to supply or market disturbance.