European Gas Prices Remain Elevated

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Global gas prices, including those for Russian gas, are shaped by international gas and oil product prices.

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

1. American market (Henry Hub):

- Current price: fell to $2.9 per million BTU (British Thermal Units) on Monday.

2. European market (TTF):

- Current price: rose to $915 per 1,000 cubic meters.

1. Henry Hub - American gas. This is essentially the Henry Hub gas distribution hub in Louisiana. This benchmark plays a leading role in shaping natural gas prices in the U.S., traded on the New York Mercantile Exchange. The unit of measurement 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 material cost only, without accounting for liquefaction, transportation, and regasification costs. Consequently, U.S. consumers pay significantly more for gas.

2. TTF - European gas. This is the main gas price benchmark in Europe. TTF stands for Title Transfer Facility, a virtual gas trading platform.

It is worth noting that gas pricing mechanisms worldwide 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.

This overview was presented by Alexey Grishchenko, Ph.D., 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.