Gas Prices See Mixed Trends Amid Market Volatility

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

World gas markets have their key price benchmarks. There are several benchmarks, two of which are primary:

1. U.S. Market (Henry Hub):

- Current price: dropped to $3.3 per million BTU (British Thermal Units) on Monday.

2. European Market (TTF):

- Current price: adjusted to $582 per 1,000 cubic meters.

1. Henry Hub is the U.S. gas benchmark. It is a physical gas distribution hub located in Louisiana. This benchmark plays a leading role in setting natural gas prices in the U.S., which are traded on the New York Mercantile Exchange. The measurement unit 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 the raw cost of the gas without accounting for liquefaction, transportation, and regasification costs. Therefore, the end consumer in the U.S. pays significantly more for gas.

2. TTF is the main European gas benchmark. The name stands for Title Transfer Facility, which is a virtual gas trading platform.

It is worth noting that gas pricing mechanisms around the world 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, which influences 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 are now more aligned with 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 Operations and Industry Management of the "Higher School of Management" Faculty at the Financial University under the Government of the Russian Federation.