Page 6 - GLNG Week 47 2022

GLNG COMMENTARY GLNG

EU releases symbolic gas

and preliminary oil cap

price numbers

COMMENTARY The European Commission has released the exercise” is carried out, the US Department of
prices for the proposed gas and preliminary oil the Treasury said in a statement the same day.
price cap that will be confirmed in the coming “The price cap for Russian oil will be set after
days, but both are at a level that is more of a sym- a technical exercise conducted by the Price Cap
bolic gesture, rather than the crushing sanctions Coalition,” reads the document, published on
many hoped would be announced. November 22 as cited by Tass. No further details
The West set the gas price cap for gas price were given.
futures traded on the Dutch T--TF exchange at Dutch front-month natural gas futures
an extremely high level of €275/MWh (€2,974 advanced more than 5% to €126/MWh on
per 1,000 cubic metres). The EU has said it is November 23, their highest level in a month
seeking to prevent “greater damage to the econ- and extending gains for a fourth session, reports
omy” of the EU. However, a caveat means the Trading Economics.
cap will only be triggered if this price level is A day earlier Gazprom warned it would curb
breached for two consecutive weeks. gas travelling through Ukraine from November
A second proposed trigger is the spread 28, via the last remaining pipeline still bringing
between the TTF exchange price and the global Russian gas to Western Europe. The transit cut
LNG price exceeding €58 within 10 trading days. will come at a time when temperatures are set
The price ceiling is limited to only one futures to dip below average as the first snows fall in
product so that market operators can still pur- Ukraine and Russia.
chase gas on the spot market and on the over the However, above-normal temperatures so far
counter (OTC) market and thus ensure the secu- this autumn have allowed gas storage sites to
rity of supply, the EC said. remain near full, creating a buffer for the winter
The restrictions will be valid for a year and as storage in the EU tanks remains well ahead
come into effect on January 1, 2023. The final of the five-year average. As of November 20, gas
price is due to be confirmed by EU energy min- reserves in the EU were 95% replete, and the total
isters at a meeting on November 24. storage level in Germany was 100%.
“This price cap for gas is proposed for a year Electricity prices remain elevated in France at
in futures for a month ahead. Thus the EU tries €427/MWh after the French power authorities
to avoid damaging the gas market, while in real- announced disappointing progress with repair
ity it costs Russia nothing to sell its gas via pipe- work on the nuclear power station fleet, which
line or as LNG at a profitable price. Now the price will keep production of power at half the usual
of gas is at the level of €120 per MWh, or €1,298 levels for the rest of the winter.
per 1,000 cubic metres,” Denis Cenusa said in a Power prices in Italy (€233/MWh), the UK
tweet. Cenusa is an academic at the East Europe (GBP283/MWh) and Germany (€178/MWh)
Studies Centre and bne IntelliNews contribu- have all fallen back from September peaks. Spain
tor who follows the energy story. (€73/MWh) has the lowest power prices of the
The oil price cap price has not been finalised major economies in the EU, but is also almost
but will be reportedly in the range of $60-$70 entire non-reliant on Russian gas to fire its gen-
– again at a level that will probably not cost the eration plants.
Kremlin any money.
“Global recession is pulling down the Brent Gas price cap at €275/MWh
oil price (blue). Russian oil trades at a discount Gas traders say the price of the cap makes little
to Brent and that discount now puts the price difference and is largely a symbolic gesture and
Putin gets per barrel around $60-65. A price is unlikely to be triggered.
cap of $65 will do little to hurt Putin. The West Brussels remains very reluctant to interfere
needs to ramp down the price cap to $30,” Robin with Russian gas deliveries, as Europe has no
Brooks, chief economist at Institute of Interna- effective means for replacing Russian gas sup-
tional Finance (IIF), said in a tweet. plies. While the storage tanks are full just as the
The final oil cap price will be determined at a first snows fall in Europe, the problem is that
G7 meeting on November 23 after a “technical while it seems likely that the EU will be able to get

P6 www. NEWSBASE .com Week 47 24•November•2022