Leaked: Brussels proposes a completely different gas price cap, which even Hungary could benefit from
On Tuesday evening, the board sent out the details of the new proposal, the essence of which is that an as yet unspecified above a predetermined nominal price level, the price cap would be activated, which would be valid for the next monthly gas futures contract on the Dutch gas exchange (TTF).
This means that a nominal price cap would be drawn on the very product to which the settlement of the Hungarian-Russian gas contract is adjusted.
As soon as it turned out: for the Russian gas delivered in the month (T) in the previous month (T-1), the reference price is the daily average of the TTF for the next monthly expiration, and for the resulting invoice amount, the consideration must be paid to Moscow after the delivery (T+1). Due to the gas price jumping to an extreme height in August, up to 340 euros/MWh, in September the Hungarian government was forced to ask Moscow for a payment extension for a part above a certain price level from October this year until next March (according to our estimate, this came into force in the range above 150 euros and thus was not paid). part must be paid in the given month in the following 3 years).
So the temporary concession negotiated by the Hungarian government is similar to what the Commission is considering now, as a formal proposal, according to which the price cap would enter the price of the front month’s TTF at a part above a specific price level (according to our assumption, the clearing house would only settle the part of the TTF transactions above the price limit up to the price cap to the seller, so a price cap would also be drawn on his income).
However, the above price cap poses a risk for Hungary, because there is a fear that it might transmit Russian gas after the activation of the price cap. it is true that even if this were the case, we would still be able to get gas from other directions on the European market.
However, Kadri Simson confidently told the news agency that their current proposal keeps security of supply risks under control, because there is no risk that the gas traders may not want to deliver to Europe and thus the LNG ships will go to Asia.
It is not yet known what will become of the above proposal, because if the Commission makes an official proposal after the meeting on November 24th, then as an emergency measure it will be enough if at least 15 member states, together representing at least 65% of the unified population, give their nod. represented, so therefore Hungary alone would not be able to block its acceptance.
It is worth noting that the above proposal is completely different from the published plans: in the mid-October proposal it was so far and this direction is quasi was approved that the Commission would have put a cap on the spot market TTF during the turbulent period, and that it is expected to lower the price of nearby futures TTFs as well. Then the other day already it was reported, that in addition to the price cap for the turbulent period, a dynamic price range would also be created, which would “insert” the authorized price range between the price agreements created on the TTF and the LNG shipments. Related to this, the price cap applied to the front-month TTF in tense periods after reaching a specific price level is a new element and can satisfy the demand for a price cap that actually lowers purchase prices for weeks.
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