The EU agreed on a more aggressive price cap on natural gas this week, which may be a disaster in the making. Had this price cap been in place this summer, Europe would have likely faced shortages.
Thought I might add GS take on the TTF-LNG gap to add some color:
"To be clear,
this past summer TTF was often more than 40 EUR/MWh above European LNG
prices because LNG import capacity in Netherlands was maxed out, and TTF had to
price incremental industrial demand destruction at the margin to balance the market.
Although Netherlands has since increased its LNG import capacity, followed by
Germany’s recent start-up of its first LNG import terminals, should these terminals
be fully utilized next summer, the same TTF-LNG price disconnect might once again
The simple idea of capping a price when you are the biggest buyer with no other choices is moronic. The purchasing strategy of the EU, based on short term contracts, has been proven wrong in light of the inability to withstand related volatility. Same goes for the selection of energy sources with large reliance on unreliable alternative. Can we call it a complete failure?
What I'd like to know is how much volume actually transacts based on the 1st TTF contract? My guess would be minuscule. IMO buying gas is very different from buying oil so the contract may not be as relevant. In any case I'd like to know how gas contracts are structured, what the benchmarks are etc.
....under the leadership of Czech Republic 🇨🇿
Thought I might add GS take on the TTF-LNG gap to add some color:
"To be clear, this past summer TTF was often more than 40 EUR/MWh above European LNG prices because LNG import capacity in Netherlands was maxed out, and TTF had to price incremental industrial demand destruction at the margin to balance the market. Although Netherlands has since increased its LNG import capacity, followed by Germany’s recent start-up of its first LNG import terminals, should these terminals be fully utilized next summer, the same TTF-LNG price disconnect might once again
arise. "
The simple idea of capping a price when you are the biggest buyer with no other choices is moronic. The purchasing strategy of the EU, based on short term contracts, has been proven wrong in light of the inability to withstand related volatility. Same goes for the selection of energy sources with large reliance on unreliable alternative. Can we call it a complete failure?
What I'd like to know is how much volume actually transacts based on the 1st TTF contract? My guess would be minuscule. IMO buying gas is very different from buying oil so the contract may not be as relevant. In any case I'd like to know how gas contracts are structured, what the benchmarks are etc.