U.S. Natural Gas Prices Continue to Correct Amid Global Market Volatility

© ООО Региональные новости

Two key international hubs where natural gas prices are formed are Henry Hub in the US and the Dutch TTF Gas hub.

1. American market (Henry Hub):

- Current price: dropped to $3.1 per million BTU (British Thermal Units) on Thursday.

2. European market (TTF):

- Current price: corrected to $480 per 1,000 cubic meters.

1. Henry Hub - American gas. This is essentially the Henry Hub gas distribution node in Louisiana. This benchmark plays a leading role in setting natural gas prices in the US, which are traded on the New York Mercantile Exchange. The unit of measurement is British Thermal Units (BTU). To convert the price to an equivalent of 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, excluding liquefaction, transportation, and regasification costs. Therefore, consumers in the US pay significantly more for 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.

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 now they are more oriented towards spot markets and competitive mechanisms, although the link to energy prices remains.

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