Global Gas Market Overview: Key Developments and Trends

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

Global gas markets have their key price benchmarks. There are several reference indicators, two of which are primary:

1. American Market (Henry Hub):

- Current price: dropped to $3 per million BTU (British Thermal Units) on Monday.

2. European Market (TTF):

- Current price: adjusted to $1000 per 1000 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 setting 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 an equivalent of 1000 cubic meters, a factor of 35.8 is used. It is important to note that this price reflects the raw material cost without accounting for liquefaction, transportation, and regasification costs. Consequently, the end consumer in the U.S. 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 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, influencing 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 Faculty of "Higher School of Management" at the Financial University under the Government of the Russian Federation.