A employee walks past gas pipelines that connect a floating storage and regasification unit to the mainland in Wilhelmshaven, northern Germany, December 17, 2022. EU energy ministers argue over a proposed gas price cap.
Michal Sohn | afp | Getty Images
European Union countries are in fierce talks on capping gas prices, and energy ministers on Monday appeared optimistic about the deal after two months of tough negotiations.
“There shall be difficult discussions, but I’m confident that we’re able to reach a collective agreement,” said French Energy Minister Agnes Pannier Runacher.
AND text draft as seen by Reuters the limit could be activated if contract prices in the first month on the Dutch TTF, the principal European benchmark for natural gas prices, exceeded EUR 188 ($200) per megawatt hour for 3 days.
Runacher said France could be “comfortable” in the “€160 to €200” range. [eur/MWh]and we feel that this price [range] coincides with the Presidency.
On Monday morning, ministers called the measure a “gas market correction mechanism” slightly than a cap. Belgian Energy Minister Tinne van der Straeten said the draft text refers to a proposal by that name.
The move is designed to protect consumers from skyrocketing prices that hit the bloc after the Russian invasion of Ukraine. European natural gas prices hit an all-time high of around €350 per megawatt-hour in August as traders were concerned about the bloc’s unity in tackling the energy crisis.
Opinions were divided on how high the ceiling ought to be and whether market intervention poses a threat to financial stability in the euro area. On December 5, the EU introduced a total ban on imports of Russian oil by sea into the region, and in early February it should apply similar measures against Moscow’s other oil products.
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Germany, the Netherlands and Austria have warned that a gas price cap could divert supplies from the EU and have called for conditions, comparable to an automatic suspension of the cap under certain circumstances.
position of Germany
The European Central Bank warned earlier this month that capping natural gas prices could cause volatility in financial markets.
“The more safeguards, the more safety nets, the more we are able to all be tolerant of the number, but it surely could be irresponsible to just set a number and say it’s strict and we’re not doing anything more,” German Economy Minister Robert Habeck said.
The central bank is not the only institution warning against the potential market consequences of introducing a price limit. ICE market operator (Intercontinental Exchange) — operator of Europe’s key natural gas market — has threatened to remove trade from the bloc if the EU takes the measure, according to the Wall Street Journal.
“Germany has asked for strong safeguards in terms of security of supply, but additionally stability in each energy and financial markets. These are concerns all of us share. This is not a problem for Germany alone, it affects all 27 of us, said Belgian van der Straeten.
Compromise at hand?
Miriam Dalli, Malta’s energy minister, said it was a “crisis time to reach a compromise” that is smart for all member states and will “reassure markets” while ensuring security of gas supply.
She said the talks had gone removed from the European Commission’s original proposal for a €275-per-megawatt-hour limit, which several member states said was too high and unlikely to be triggered.
The Dutch TTF reached a level of around 109.2 eur/MWh at 16:00 on Monday CET, the lowest level since November 11.
Greek Energy Minister Konstantinos Skrekas said the countries had “a clear mandate from our leaders to propose a solution to the cap today.”
“We would not be so pushy if we weren’t convinced that this is the best solution for European residents,” he said, adding that any cap between €150 and €200/MWh could be effective. Asked about the usefulness of a price cap of 188 eur/MWh, he said that such a level would “give the right signals to the market”.
Estonian Finance Minister Riina Sikkut also said she was “positive” that a compromise may very well be reached, but added that it was difficult to say exactly what it will be. She expressed confidence that “excellent news” would come on Monday evening.
Jozef Sikela, Minister of Industry of the Czech Republic, and Kadri Simson, European Commissioner for Energy, are due to hold a press conference at 17:30 CET.
Ruxandra Iordache and Hannah Ward-Glenton of CNBC contributed to this story.