European Gas Market Continues to See Price Corrections

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Global gas prices, including those for Russian gas, are formed 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. American market (Henry Hub):

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

2. European market (TTF):

- Current price: fell to $530 per 1,000 cubic meters.

1. Henry Hub - American gas. This is the Henry Hub gas distribution hub 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 unit of measurement is British Thermal Units (BTU). To convert the price to an equivalent of 1,000 cubic meters, a conversion factor of 35.8 is used. It is important to note that this price reflects the raw material cost only, without accounting for liquefaction, transportation, and regasification costs. Therefore, U.S. consumers 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, 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 affects global benchmarks, including gas prices and the cost of alternative fuels (gas, oil, coal).

Prices for Russian gas, especially on 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 Operational and Sectoral Management of the "Higher School of Management" Faculty at the Financial University under the Government of the Russian Federation.