Global Gas Market Sees Minor Adjustment

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Global gas prices, including those for Russian gas, are formed based on international gas and oil product prices.

Key benchmarks shape global gas markets. There are several benchmarks, with two being the most important:

1. American market (Henry Hub):

- Current price: dropped to $2.8 per million BTU (British Thermal Units) on Monday.

2. European market (TTF):

- Current price: adjusted to $600 per 1,000 cubic meters.

1. Henry Hub is the benchmark for American gas. It is a physical gas distribution hub in Louisiana, which serves as the primary price-setting mechanism for natural gas traded on the New York Mercantile Exchange. The unit of measurement is British Thermal Units (BTU). To convert the price to 1,000 cubic meters, a factor of 35.8 is used. It is important to note that this price reflects only the raw cost of the gas, excluding liquefaction, transportation, and regasification costs. Therefore, the final price paid by American consumers is significantly higher.

2. TTF is the benchmark for European gas. It stands for Title Transfer Facility, a virtual trading platform for gas in Europe.

It is worth noting that gas pricing mechanisms around the world are diverse. They include competitive trading on exchanges (like TTF in Europe), oil-indexed pricing (linking gas prices to oil prices), regulated prices, and direct contracts where prices are determined by the balance of supply and demand, which influences global benchmarks including gas prices and the cost of alternative fuels (gas, oil, coal).

Historically, Russian gas prices, particularly for export markets, have been heavily influenced by oil-indexed pricing. However, they are now increasingly aligned with spot markets and competitive mechanisms, although the link to energy prices remains.

Analysis provided by Alexey Grishchenko, Doctor of Economics, Professor at the Department of Operations and Industry Management of the Higher School of Management at the Financial University under the Government of the Russian Federation.