Henry Hub is the benchmark price for natural gas in the United States. The name comes from a real place: a pipeline interchange in Erath, Louisiana, where several major pipelines meet. The natural gas futures contract traded on the New York Mercantile Exchange is priced for delivery there, and that contract has become one of the most actively traded energy markets in the world. For UK traders, it is also a useful contrast with European gas prices, which often behave very differently.
Why Henry Hub became the benchmark
Natural gas is harder to move than oil. It needs pipelines or specialist ships, so prices tend to be regional rather than global. In the US, Henry Hub’s location at the meeting point of many pipelines made it a natural place to set a reference price. Today, most US gas is priced relative to Henry Hub, with local prices trading at a premium or discount depending on pipeline capacity and demand in each region.
Europe’s equivalent is the Dutch TTF hub, while the UK has its own National Balancing Point. Our guide to TTF natural gas explains how European pricing works.
Why US gas is often cheaper
The shale revolution transformed US gas supply. Advances in horizontal drilling and hydraulic fracturing unlocked vast reserves, and the US became the world’s largest producer of natural gas. As a result, Henry Hub prices have often been far lower than prices in Europe or Asia, where countries depend more on imports.
That gap is the reason liquefied natural gas, or LNG, has become such a big business. Gas is cooled into a liquid, loaded onto tankers and shipped across oceans. The US is now one of the world’s largest LNG exporters, and those exports link Henry Hub more closely to international prices than ever before.
What moves Henry Hub prices
Weather. Gas is used heavily for heating in winter and for power generation, including air conditioning, in summer. Forecasts for cold snaps or heatwaves can move prices quickly, and weather is often the biggest single short-term driver.
Storage. Every Thursday, the US Energy Information Administration publishes a weekly storage report showing how much gas was injected into or withdrawn from storage. Traders compare that figure with expectations and with the five-year average. A smaller-than-expected injection or a larger withdrawal can lift prices. The storage season matters too: injections typically run from April to October, and withdrawals from November to March.
Production. Output from major shale regions can change with drilling activity, pipeline maintenance and the price of oil, since some gas is produced as a by-product of oil drilling.
LNG exports. When export terminals are running at full capacity, more US gas leaves the domestic market, which supports prices. Outages at major terminals can do the opposite, leaving more gas at home.
Why it is so volatile
Natural gas has a reputation as one of the most volatile major commodities. Demand can swing sharply with the weather, while supply and storage capacity are relatively fixed in the short term. That combination can produce large daily moves, especially in winter. Contracts for different months can also behave very differently, with winter contracts often carrying a premium. Our guide to contango and backwardation explains how the futures curve works, and the same ideas apply to gas.
How it connects to the UK
UK gas prices are set by European and global conditions, not Henry Hub. But the US matters indirectly. American LNG cargoes help supply Europe, and when US exports rise, they can help ease pressure on European prices. When US prices jump or export capacity is disrupted, the effect can ripple across the Atlantic. Understanding Henry Hub helps make sense of the wider energy picture, including how energy prices feed into UK inflation.
Practical points for traders
If you trade natural gas through spread bets or CFDs, check which contract you are trading and how rollovers are handled, as moving from one month to the next can create apparent price jumps. Check margin requirements and spreads too, as these can widen in fast markets. Most importantly, size positions carefully. Gas can move several per cent in a day on a weather forecast alone.
Bringing it together
Henry Hub is the US benchmark for natural gas, priced at a Louisiana pipeline hub and traded as one of the world’s busiest energy futures. Weather, storage, production and LNG exports drive its price, and its volatility demands respect. For UK traders, it is a useful piece of the global energy puzzle even though domestic prices are set elsewhere.
If you are thinking about trading energy markets and want an honest view of your readiness, our free trader assessment is a sensible place to start.
