Global Gas Market Sees Widespread Sell-Off

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Natural gas pricing, including that of Russian origin, is formed based on current global gas and oil prices.

There are two primary international gas pricing hubs: Henry Hub in the US and the Dutch TTF Gas hub.

1. American market (Henry Hub):

- Current price: Wednesday correction to $2.7 per million BTU (British Thermal Units).

2. European market (TTF):

- Current price: Wednesday increase to $533 per 1,000 cubic meters.

1. Henry Hub - American gas. This is a gas distribution hub located in Louisiana, USA. It serves as a benchmark for natural gas prices in the US, 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 conversion factor of 35.8 is used. It is important to note that this price reflects the raw cost of the gas, excluding liquefaction, transportation, and regasification costs. Consequently, the end consumer in the US pays significantly more for the gas.

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

Gas pricing mechanisms worldwide are diverse: they include exchange trading (competitive pricing, as on TTF in Europe), oil-indexation (linking gas prices to oil prices), regulated prices, and direct contracts where prices are determined by the balance of supply and demand, influencing global benchmarks including gas prices and the cost of alternative fuels (gas, oil, coal).

Russian gas prices, especially for export markets, have traditionally been heavily dependent on oil-indexation, but now they are more aligned with spot markets and competitive mechanisms, although the link to energy prices remains.

Overview presented by Alexey Grishchenko, Ph.D., Professor at the Department of Operational and Sectoral Management, Faculty of "Higher School of Management", Financial University under the Government of the Russian Federation.