European gas prices suddenly "turn around", EC allows EU to do this

On November 20, the European Commission (EC) extended by 6 months (until June 2024) the plan allowing European Union (EU) countries to support companies affected by rising energy prices caused by the Russia-Ukraine conflict.

The Reckrod gas storage facility in Eiterfeld, Germany. (Source: AP)

The temporary measure allows the 27 EU member states to provide various forms of financial support to compensate companies affected by rising electricity and gas costs.

The plan was introduced a month after Russia launched a special military operation in Ukraine in February 2022, disrupting energy supplies and causing prices to skyrocket. The plan expires on December 31, 2023.

The EC said that although energy prices have stabilised since the end of last year, “energy markets remain vulnerable”.

“Member states can maintain their support programmes to cover the upcoming winter heating period as a safety net,” the EC said in a statement.

However, Brussels stipulates that subsidies are only allowed “to the extent that energy prices significantly exceed pre-crisis levels”.

Natural gas prices in Europe rose on forecasts for colder weather. Prices rose nearly 7% on Friday, snapping a four-session losing streak. The contract is still trading in a tight range near 50 euros per megawatt hour, where it has been for much of the past few weeks.

Temperatures across much of northwestern Europe are expected to fall below normal by the end of the month, which could boost heating demand.

Meanwhile, a ship seized by Iran-backed Houthi rebels in the Red Sea on November 19 has raised concerns that the Israel-Hamas war could lead to widespread shipping disruptions.

“Anything that could be considered a catastrophe could cause a price spike,” said Jonathan Stern, an expert at the Oxford Institute for Energy Studies. “There is a possibility that the conflict could spread and that could disrupt the flow of gas from Qatar to Europe. But at the moment, there is no indication that that could happen.”

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