U.S. Natural Gas Prices Continue Correction on Global Market Dynamics

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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 pricing benchmarks. There are several benchmarks, two of which are the main ones:

1. American market (Henry Hub):

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

2. European market (TTF):

- Current price: dropped to $680 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 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 material cost only, without taking into account liquefaction, transportation, and regasification costs. Therefore, the end consumer in the US pays 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 the price is 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 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.

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 of the Financial University under the Government of the Russian Federation.