Henry Hub

What Is Henry Hub?

Henry Hub is a natural gas pipeline junction in Erath, Louisiana, that serves as the official delivery point for natural gas futures on the New York Mercantile Exchange (NYMEX). Owned by Sabine Pipe Line LLC, the hub links the U.S. Gulf Coast supply network to major gas markets across the country.

Location, Owner, and Connections

• Location: Erath, Louisiana
• Owner: Sabine Pipe Line LLC
• Connections: The hub ties into multiple pipelines — the site connects four intrastate and nine interstate pipelines, including major lines such as Transcontinental, Acadian, and Sabine.

Role in Futures and Market Pricing

Henry Hub is the pricing point for NYMEX natural gas futures. The NYMEX contract for delivery at Henry Hub began trading in 1990 and offers contracts with delivery windows extending forward (commonly quoted on an up-to-months basis). Settlement prices established at Henry Hub are widely used as the benchmark for the North American natural gas market and influence parts of the global liquefied natural gas (LNG) market.

Why Hub-Based Pricing Matters

Hub pricing like Henry Hub reflects the local supply-and-demand balance for natural gas as a stand-alone commodity. This contrasts with many markets where gas prices are indexed to crude oil, which follows different supply/demand drivers. The distinct advantages of a transparent hub price include:

• Direct reflection of regional supply/demand fundamentals
• High liquidity and frequent price discovery via futures markets
• Readily available, widely quoted settlement prices

Regional Differences: Europe and Asia

European and Asian gas markets have historically been more fragmented:

• Europe: Multiple national hubs and legacy oil-indexed contracts have complicated the development of a single pan-European benchmark, although efforts in the Netherlands and the UK aim to strengthen hub-based pricing.
• Asia: Lacks a dominant regional hub; many contracts are still indexed to oil or linked to Henry Hub pricing when spot-indexed arrangements are preferred.

Henry Hub and the Global LNG Market

Even though Henry Hub reflects North American spot gas, it is frequently referenced in global LNG contracts. Producers and buyers sometimes prefer spot-based pricing instead of oil indexing, particularly when crude oil prices are falling or when they seek transparent, liquid benchmarks. Henry Hub’s high trading volume, pricing transparency, and broad media and exchange coverage make it a convenient reference for spot-based LNG contracts.

Key Takeaways

• Henry Hub is the NYMEX delivery point and the benchmark for North American natural gas pricing.
• Owned by Sabine Pipe Line LLC, the hub connects numerous interstate and intrastate pipelines.
• Its transparent, liquid pricing supports both domestic market clearing and global LNG contracts, offering an alternative to oil-indexed gas pricing used in many regions.