ICE warns that EU gas price caps could lead to higher prices

The exchanges operator has issued a warning to the European Union. According to its’ statement, as a result of the European Union's decision to establish a cap on gas prices will increase the possibility of an increase in the price of the resource to the limit. This follows from a document obtained by Reuters.

Last month, the European Commission proposed a price cap. It would come into effect if the price of gas on the Dutch gas exchange Title Transfer Facility (TTF) surpasses a price of 275 euros ($288) for a megawatt-hour over a period of two weeks and is 58 euros above the benchmark price of liquefied natural gas for 10 days.

In a memo submitted to the European Commission, the Intercontinental Exchange (ICE), which hosts the TTF, said the proposal could actually lead to higher gas prices. Despite the fact that it is intended to protect EU economies from gas price hikes.

The note, seen by Reuters, said that if prices rise to a level even relatively close to the limit, the resource suppliers are likely to start buying back short positions and stop selling gas futures TTF. By doing so, they will try to hedge their risk of holding those positions when the cap is set on.