Global Gas Market Experiencing Correction

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There are two major global hubs for natural gas pricing: Henry Hub in the US and TTF Gas in the Netherlands within the EU.

The price of natural gas, including Russian natural gas, is determined based on current global gas and oil prices.

1. US Market (Henry Hub):

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

2. European Market (TTF):

- Current price: rose to $560 per 1,000 cubic meters.

1. Natural Gas in the US (NG).

The benchmark price for natural gas in the US is set at Henry Hub, a storage facility located in Louisiana.

2. European Gas.

European gas trading primarily takes place on European gas hubs, with the largest being the Dutch TTF Natural Gas Exchange. This Dutch market leads the European gas sector due to its trading volume, which exceeds the internal demand of the Netherlands by more than 14 times. Around 20 trillion cubic meters of gas are traded annually here.

It is important to note that gas pricing mechanisms around the world are diverse: they include exchange trading (competitive pricing, as on TTF in Europe), oil-indexation (linking prices to oil), regulated prices, and direct contracts where the price is determined by the balance of supply and demand, which influences global benchmarks including gas prices and the cost of alternative fuels (gas, oil, coal).

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

This overview was presented by Alexey Grishchenko, Doctor of Economics, Professor at the Department of Operational and Sectoral Management of the Higher School of Management at the Financial University under the Government of the Russian Federation.