BRUSSELS - The European Commission will extend its gas price cap system to all trading hubs in the European Union from May to prevent potential distortions to Europe's energy markets, it said on Friday.
EU countries agreed the cap in December after drawn-out talks over taming gas prices that hit record levels after Russia cut gas deliveries to Europe following its invasion of Ukraine.
For now, the cap is triggered if prices exceed 180 euros ($196) per megawatt hour for three days on the Dutch Title Transfer Facility (TTF) gas hub's front-month contract.
The TTF price must also be 35 euros/MWh higher than a reference price based on existing liquefied natural gas (LNG) price assessments for three days.
TTF derivatives account for more than 90% of the natural gas derivatives traded on regulated markets in the European Union.
The Commission said its "market correction mechanism" would extend to derivatives linked to trading in all other EU hubs from May 1.
The EU executive said the move would provide an even broader shield against high and volatile gas prices and help avoid potential distortions from applying it solely to TTF derivatives.
If triggered, trades would not be permitted on the front-month, three-month and front-year TTF contracts at a price more than 35 euros/MWh above the reference LNG price, which is currently set at 39.09 euros/MWh.
This caps the price at which gas can be traded, but the cap can fluctuate alongside global LNG prices - a system designed to ensure EU countries can still bid for gas in global markets.
The front-month TTF gas price contract hit a record high of 343 euros in August, but was trading on Friday at 45.70 euros/MWh, Refinitiv Eikon data showed.
The cap mechanism is designed to be temporary, applying until January 2024.
($1 = 0.9185 euros)
(Reporting by Philip Blenkinsop; Editing by Jan Harvey)