European Gas Jumps on Uncertainty Over Temporary Price Cap

(Bloomberg) — Natural gas prices rose amid uncertainty over the European Union’s plans to impose a temporary price cap on imports. 

Benchmark Dutch futures jumped as much 7.8%, following three sessions of losses. The European Commission on Monday signaled that other measures to limit excessive price swings may be more efficient than a cap. 

Read More: EU Dims Hopes for a Price Cap to Contain Soaring Gas Costs

Traders have been watching every move of the negotiations for a package to contain the crisis. Fears that the situation will worsen have eased in recent weeks due to mild weather, an influx of liquefied natural gas and nearly full storage levels. Still, the risk of further supply disruptions remains and temperatures are set to fall as winter approaches, prompting heating demand. 

Political wrangling over a price cap risks delaying an deal on an emergency package to rein in soaring energy prices, according to EU diplomats. The bloc’s energy ministers are scheduled to meet and try ironing out an agreement on the proposal, which would pave the way for a separate regulation on limiting prices, on Nov. 24.

Meanwhile, warmer-than-usual weather has kept a lid on heating demand and delayed withdrawals from storage sites, which are 95.3% full, according to Gas Infrastructure Europe. Forecasts show above-average temperatures in northwest Europe are set to persist until the end of the month.

“With gas storage at all time highs and with little drawdowns from storage over the last week levels are expected to continue to stay comfortable,” Alfa Energy said in a research note. “Gas prices in the far curve should continue on a bearish trend albeit slower to recent weeks.” 

, Europe’s benchmark, traded 5.3% higher at €115.50 a megawatt-hour by 10:42 a.m. in Amsterdam. The UK equivalent rose 5.1%.

©2022 Bloomberg L.P.

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