Europe launches new LNG benchmark to help contain price spikes

John Ainger, Bloomberg April 03, 2023

(Bloomberg) — Europe has a new benchmark for liquefied natural gas (LNG) which regulators hope will disentangle the market from the kind of price surges witnessed last year.

The European Union Agency for the Cooperation of Energy Regulators launched the new price gauge on Friday, indicating that LNG was trading at a discount of €9.57 per megawatt-hour compared to a front-month contract on the Dutch Title Transfer Facility.

The goal is to provide greater cost transparency and help shield the LNG market from the kinds of price swings that battered the TTF futures market last year, which sent energy bills soaring for consumers. The EU has moved away from pipeline gas flows toward LNG in the wake of Russia’s invasion of Ukraine. Still, questions remain over the extent to which traders will use the new benchmark.

ACER’s LNG price assessment consists of the weighted average price of daily LNG spot transactions and is based on deals concluded and reported for delivery in the EU.

The agency publishes daily LNG prices for northwest Europe and southern Europe, and, from March 8, also the unified LNG price for the EU. It was assessed at €38.27 a megawatt-hour on Friday.

Intercontinental Exchange Inc. started offering European LNG futures on Dec 5. The contracts — separate for northwest and southwest Europe — are based on price assessments from Spark Commodities. S&P Global Commodity Insights also publishes its own LNG price assessments for the region.

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