ICE to Open Alternative European Natural Gas Market in London Following EU Price Cap

By Will Horner

Intercontinental Exchange Inc. on Friday outlined plans to open a parallel natural gas market in London, to help traders sidestep recently approved EU measures to cap the region's benchmark gas prices.

ICE, which currently operates the Amsterdam-based Title Transfer Facility--considered the benchmark for European gas prices--said it aims to launch the new market on Feb. 20, five days after the European Union's price cap comes into effect.

The new market would offer futures and options which mirror the TTF contracts but won't be subject to the EU's price cap, ICE said. The exchange operator, which last month warned against the new rules, said the parallel exchange would serve as an insurance option for its customers and help traders manage risk.

The exchange also said its ICE Endex hub, on which the TTF contracts trade currently operates, would change its rules to comply with the EU's new rules which come into force on Feb. 15.

"ICE's purpose is to create markets to allow our customers to manage their risk and we have a duty to our customers to provide solutions to the problems they face," said Trabue Bland, senior vice president for futures exchanges at ICE.

The EU's price cap, which was agreed upon last month, caps TTF gas prices at EUR180 a megawatt hour if they breach that level for three consecutive days and are also at the time at least EUR35 higher than a measure of global liquified natural gas prices.

The EU measures aim at preventing a repeat of the volatility and sharp price spikes which characterized the continent's gas market last year. The region's gas prices surged to record levels following Russia's invasion of Ukraine and Moscow's steady curtailment of its gas supplies to Europe, hitting a high of almost EUR350 MW/h in August.

A warmer-than-expected winter and ample supplies of imported U.S. LNG have seen prices tumble in recent months. Prices fell further Friday, down 1.7% to EUR53.86 MW/h, their lowest level since September 2021.

The new London-based gas market would trade on the ICE Futures Europe exchange which already handles the U.K.'s benchmark gas market among others.

Write to Will Horner at william.horner@wsj.com

(END) Dow Jones Newswires

January 27, 2023 10:26 ET (15:26 GMT)

Intercontinental Exchange (NYSE:ICE)
Historical Stock Chart
From Mar 2024 to Apr 2024