Gas Market: Prices See Modest Upswing

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Global gas prices, including those for Russian gas, are determined based on international gas and oil product prices.

Each global gas market has its own key price benchmarks. There are several benchmarks, with two being the most important:

1. American Market (Henry Hub):

- Current price: dropped to $3.2 per million BTU (British Thermal Units) on Monday.

2. European Market (TTF):

- Current price: adjusted to $953 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 determining 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 1,000 cubic meters, a conversion factor of 35.8 is used. It is important to note that this price reflects only the raw material cost, excluding 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 Aleksey Grishchenko, Ph.D., Professor at the Department of Operations and Industry Management of the "Higher School of Management" Faculty at the Financial University under the Government of the Russian Federation.