Gas Prices Surge Amid Rising Demand and Supply Constraints

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Key International Gas Hubs: Henry Hub and TTF

Two major international hubs where natural gas prices are formed are Henry Hub in the United States and the Dutch TTF Gas hub.

1. American Market (Henry Hub):

- Current price: dropped to $2.7 per million BTU (British Thermal Units) on Thursday.

2. European Market (TTF):

- Current price: corrected to $705 per 1,000 cubic meters.

1. Henry Hub - American gas. This is a gas distribution hub located in Louisiana, which 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 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 cost of the gas, excluding liquefaction, transportation, and regasification costs. Therefore, the end consumer in the US pays significantly more.

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 worldwide are diverse, including competitive market-based pricing (as seen on TTF in Europe), oil-indexed pricing (tied to oil prices), regulated prices, and direct contracts where prices are determined by the balance of supply and demand, affecting global benchmarks including gas prices and the cost of alternative fuels (gas, oil, coal).

Prices for Russian gas, particularly for export markets, have traditionally been heavily dependent on oil-indexed pricing, 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 Sectoral Management of the Faculty of Higher School of Management at the Financial University under the Government of the Russian Federation.