【Pricing Fundamentals】How the Henry Hub Price Drives US Gas Markets
Quote from chief_editor on May 2, 2026, 11:28 pmHenry Hub natural gas benchmark explained: learn what Henry Hub measures, how it is used to price US gas contracts, and its relationship to LNG export pricing.
Henry Hub is the primary benchmark for natural gas prices in the United States. It refers to a specific pipeline interconnection point in Erath, Louisiana, operated by Sabine Pipe Line, where multiple interstate and intrastate natural gas pipelines converge. The physical location of Henry Hub allows natural gas to flow to and from multiple producing regions and consuming markets, making it the most liquid and widely referenced point in the US natural gas system.
The Henry Hub price is the settlement price for the New York Mercantile Exchange (NYMEX) natural gas futures contract — the most actively traded natural gas futures contract in the world. Physical natural gas contracts throughout the United States, and an increasing number of international contracts for liquefied natural gas (LNG), are priced either directly against Henry Hub or as a differential to it.
How Henry Hub Pricing Works in Physical Gas Contracts
Physical natural gas in the United States is priced at various delivery points across the pipeline network, and each point trades at a differential to Henry Hub. A point with abundant supply and limited pipeline takeaway capacity — for example, the Permian Basin hub of Waha in Texas during periods of pipeline congestion — may trade at a significant discount to Henry Hub. A delivery point in a high-demand consumption center with limited supply diversity may trade at a premium.
The NYMEX Henry Hub futures contract specifies delivery of natural gas at Henry Hub itself, in units of million British thermal units (MMBtu). The price is expressed in USD per MMBtu. Monthly futures contracts trade for delivery in specific calendar months, and the prompt month contract price — the nearest expiring contract — is the most widely quoted reference for the current US natural gas price level.
For example, if the NYMEX Henry Hub prompt month futures price is USD 2.80 per MMBtu and a gas producer in the Appalachian basin is selling natural gas at Dominion South — a delivery point in Pennsylvania — at Henry Hub minus USD 0.40 per MMBtu, the effective price received by the Appalachian producer is USD 2.40 per MMBtu. The USD 0.40 basis differential reflects pipeline capacity constraints between Appalachia and the Henry Hub pricing point.
Henry Hub and LNG Export Pricing
The growth of US LNG exports from terminals in Texas and Louisiana has created a new international application for the Henry Hub benchmark. Many long-term LNG supply contracts signed between US LNG exporters — such as Cheniere Energy, Venture Global, and Sempra — and international buyers in Asia and Europe are structured as Henry Hub plus a liquefaction fee, plus shipping.
A typical US LNG export contract might specify: price = 115% of Henry Hub monthly average plus USD 3.00 per MMBtu liquefaction fee. The 115% factor reflects the energy content difference between pipeline gas and LNG, and the USD 3.00 represents the tolling fee for liquefaction. The buyer then adds shipping cost to arrive at a delivered price.
For Asian buyers, this structure links their LNG import cost to US gas prices rather than to oil-indexed benchmarks — a significant structural shift that occurred as US LNG exports grew. When Henry Hub prices are low relative to oil-indexed LNG prices, US LNG becomes highly competitive for Asian buyers. When Henry Hub rises — as it did sharply in 2022 following the Russian invasion of Ukraine — US LNG buyers face elevated costs that may exceed oil-indexed alternatives.
Henry Hub is both a domestic US gas benchmark and, through LNG export contracts, an increasingly global pricing reference — and understanding its structure and the differentials that separate it from other delivery points is foundational for anyone working in gas or LNG trade.
Keywords: Henry Hub natural gas benchmark US markets explained | Henry Hub gas price, US natural gas benchmark, HH indexed LNG contract, NYMEX gas futures price, natural gas pricing formula
Words: 630 | Source: US Energy Information Administration (EIA); NYMEX contract specifications; Industry knowledge — WorldTradePro editorial research | Created: 2026-04-09
Henry Hub natural gas benchmark explained: learn what Henry Hub measures, how it is used to price US gas contracts, and its relationship to LNG export pricing.
Henry Hub is the primary benchmark for natural gas prices in the United States. It refers to a specific pipeline interconnection point in Erath, Louisiana, operated by Sabine Pipe Line, where multiple interstate and intrastate natural gas pipelines converge. The physical location of Henry Hub allows natural gas to flow to and from multiple producing regions and consuming markets, making it the most liquid and widely referenced point in the US natural gas system.
The Henry Hub price is the settlement price for the New York Mercantile Exchange (NYMEX) natural gas futures contract — the most actively traded natural gas futures contract in the world. Physical natural gas contracts throughout the United States, and an increasing number of international contracts for liquefied natural gas (LNG), are priced either directly against Henry Hub or as a differential to it.
How Henry Hub Pricing Works in Physical Gas Contracts
Physical natural gas in the United States is priced at various delivery points across the pipeline network, and each point trades at a differential to Henry Hub. A point with abundant supply and limited pipeline takeaway capacity — for example, the Permian Basin hub of Waha in Texas during periods of pipeline congestion — may trade at a significant discount to Henry Hub. A delivery point in a high-demand consumption center with limited supply diversity may trade at a premium.
The NYMEX Henry Hub futures contract specifies delivery of natural gas at Henry Hub itself, in units of million British thermal units (MMBtu). The price is expressed in USD per MMBtu. Monthly futures contracts trade for delivery in specific calendar months, and the prompt month contract price — the nearest expiring contract — is the most widely quoted reference for the current US natural gas price level.
For example, if the NYMEX Henry Hub prompt month futures price is USD 2.80 per MMBtu and a gas producer in the Appalachian basin is selling natural gas at Dominion South — a delivery point in Pennsylvania — at Henry Hub minus USD 0.40 per MMBtu, the effective price received by the Appalachian producer is USD 2.40 per MMBtu. The USD 0.40 basis differential reflects pipeline capacity constraints between Appalachia and the Henry Hub pricing point.
Henry Hub and LNG Export Pricing
The growth of US LNG exports from terminals in Texas and Louisiana has created a new international application for the Henry Hub benchmark. Many long-term LNG supply contracts signed between US LNG exporters — such as Cheniere Energy, Venture Global, and Sempra — and international buyers in Asia and Europe are structured as Henry Hub plus a liquefaction fee, plus shipping.
A typical US LNG export contract might specify: price = 115% of Henry Hub monthly average plus USD 3.00 per MMBtu liquefaction fee. The 115% factor reflects the energy content difference between pipeline gas and LNG, and the USD 3.00 represents the tolling fee for liquefaction. The buyer then adds shipping cost to arrive at a delivered price.
For Asian buyers, this structure links their LNG import cost to US gas prices rather than to oil-indexed benchmarks — a significant structural shift that occurred as US LNG exports grew. When Henry Hub prices are low relative to oil-indexed LNG prices, US LNG becomes highly competitive for Asian buyers. When Henry Hub rises — as it did sharply in 2022 following the Russian invasion of Ukraine — US LNG buyers face elevated costs that may exceed oil-indexed alternatives.
Henry Hub is both a domestic US gas benchmark and, through LNG export contracts, an increasingly global pricing reference — and understanding its structure and the differentials that separate it from other delivery points is foundational for anyone working in gas or LNG trade.
Keywords: Henry Hub natural gas benchmark US markets explained | Henry Hub gas price, US natural gas benchmark, HH indexed LNG contract, NYMEX gas futures price, natural gas pricing formula
Words: 630 | Source: US Energy Information Administration (EIA); NYMEX contract specifications; Industry knowledge — WorldTradePro editorial research | Created: 2026-04-09