High Gas Prices Continue to Dominate European Market

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Natural gas pricing, including Russian gas, is determined based on current global gas and oil prices.

There are two main international gas pricing hubs: Henry Hub in the U.S. and TTF Gas in the Netherlands.

1. U.S. Market (Henry Hub):

- Current price: Wednesday correction to $3.1 per million BTU (British Thermal Units).

2. European Market (TTF):

- Current price: Wednesday increase to $888 per 1,000 cubic meters.

1. Henry Hub – American gas. This is the Henry Hub gas distribution hub in Louisiana, which serves as the benchmark for U.S. natural gas prices traded on the New York Mercantile Exchange. The pricing unit 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’s important to note that this price reflects only the raw material cost, excluding liquefaction, transportation, and regasification costs. Therefore, U.S. consumers pay significantly more for gas.

2. TTF – European gas. This is the primary benchmark for gas prices in Europe. TTF stands for Title Transfer Facility, a virtual gas trading platform.

Gas pricing mechanisms worldwide are diverse, including competitive market trading (as on TTF in Europe), oil-indexed pricing (linking gas prices to oil prices), regulated prices, and direct contracts where prices are determined by supply and demand dynamics affecting 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 influenced by oil-indexed pricing, but are now more aligned with spot markets and competitive mechanisms, although the link to energy prices remains.

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