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Italy Urges EU to Set Much Lower Cap on Natural Gas Prices
The EU needs to extend the cap on natural gas prices but set the cap at a much lower level, to avoid fresh shocks in energy bills, Italian Energy Security Minister Gilberto Pichetto Fratin told a local radio station on Friday.
“At this point, the EU needs to renew the price cap, but lower the ceiling,” Pichetto Fratin told Radio Radicale.
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The European Union set at the start of 2023 an emergency cap on natural gas prices. This cap expires at the end of January 2025.
The cap on gas prices, the so-called “market correction mechanism,” was introduced at the end of 2022 to shield industry and households from excessive spikes in gas and power prices after the record-high levels seen at the end of the summer of 2022, when Russia cut off most of its pipeline gas supply to Europe.
The market correction mechanism will be triggered if the month-ahead price on the Title Transfer Facility (TTF), Europe’s key benchmark, exceeds $185 (180 euros) per MWh for three working days, and the month-ahead TTF price is $36 (35 euros) higher than a reference price for LNG on global markets for the same three working days.
According to the Italian minister, the cap on natural gas prices needs to be lowered to $51-$62 (50-60 euros) per MWh.
For reference, Dutch TTF Natural Gas Futures, the benchmark for Europe’s gas trading, traded at $51.61 (50.145 euros) per MWh as of 11:44 a.m. in Amsterdam on Friday.
Prices rose at the start of the new year after Russian flows to Europe via Ukraine stopped after decades of pipeline deliveries through the route.
At 0500 GMT on New Year’s Day, Russian gas giant Gazprom halted pipeline deliveries, and the last remaining EU members that were still receiving gas from Russia until December 31 – Austria, Slovakia, and Hungary – lost this source of supply.
Hungary will continue to receive Russian gas via the TurkStream gas pipeline via Turkey and the Balkans, while Austria and Slovakia have arranged to have natural gas from other sources supplied.
By Tsvetana Paraskova for Oilprice.com
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Tsvetana Paraskova
Tsvetana is a writer for Oilprice.com with over a decade of experience writing for news outlets such as iNVEZZ and SeeNews.
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