What is Henry Hub natural gas?

As the delivery point for Henry Hub Natural Gas futures, the Henry Hub, located in Erath, Louisiana, is a nexus of several natural gas interconnections. Here you will find interstate and intrastate pipelines, as well as other related infrastructure.

What is Henry Hub & how does it work?

Henry Hub is also used in delivery contracts for LNG on a global basis, despite being a spot price for natural gas that is very specific to the North American gas market. Some global gas producers like Qatar and Australia prefer to base the pricing mechanism of their natural gas deliveries on spot prices rather than indexing to the price of oil.

What are Henry Hub settlement prices?

The settlement prices at Henry Hub are used as benchmarks for the entire North American natural gas market and parts of the global liquid natural gas (LNG) market. Henry Hub is an important market clearing pricing concept because it is based on the actual supply and demand of natural gas as a stand-alone commodity.

Why do local markets price natural gas based on a differential?

When local markets across the United States price their natural gas, they tend to do so based off a differential to Henry Hub. This differential accounts for regional market conditions, transportation costs and available transmission capacity between locations. Henry Hub is owned and operated by Sabine Pipe Line LLC and its affiliates.