The European Union (EU) has published the first LNG reference price for use in a market control mechanism to cap natural gas prices under regulations that take effect later this month. 

The reference price is an average of several liquefied natural gas indexes and benchmark prices that will be used to trigger the cap if prices climb too high. It was launched at $17.13/MMBtu on Thursday.

Under regulations released last month that will take effect in February, the price cap is activated if the front-month Title Transfer Facility (TTF) contract price exceeds 180 euros/MWh for three business days, or roughly $57/MMBtu. TTF would also have to be 35 euros/MWh, or about $11/MMBtu above the LNG reference price over the same period. 

The reference price will be published each weekday by the EU Agency for the Cooperation of Energy Regulators (ACER), which would also publish a notice on its website if the market control mechanism is activated. 

However, global gas prices have plummeted in recent weeks amid warm weather across the Northern Hemisphere and strong inventories. Amid an influx of LNG, European prices have hit their lowest point since 2021. TTF has been trading below $20, as has the Japan-Korea Marker. 

ACER recently started assessing LNG prices in Northwest and South Europe that were also below $20 on Friday. Those assessments are to be used in a benchmark that is more representative of seaborne LNG transactions on the continent. 

The agency was directed to start publishing a daily benchmark price by the end of March, which the market could then voluntarily adopt. TTF is a virtual pipeline trading hub, where prices often diverge from those at the continent’s LNG import terminals.