Why Henry Hub Matters in Global Energy Trading
Henry Hub, located in Erath, Louisiana, is the centre of U.S. natural gas pricing. It connects more than a dozen interstate and intrastate pipelines, creating a network that links Gulf Coast production to national and export markets.
It’s also the delivery point for NYMEX Natural Gas Futures, the world’s most traded gas contract. Over time, this made Henry Hub the global benchmark for natural gas, similar to how Brent serves as the benchmark for oil.
As U.S. LNG exports expanded over the decades, the Henry Hub’s influence grew. Prices here now affect LNG cargoes bound for Europe and Asia. A shift of just $0.10/MMBtu in Henry Hub futures can move LNG export margins by millions of dollars. For global traders, understanding this benchmark is essential.
Market Structure and Key Traded Products
Henry Hub functions both physically and financially.
- Physical side: gas can actually be delivered into the hub via pipelines. This creates real, measurable flows that ground the market in reality.
- Financial side: most trading happens through futures and derivatives that track the Henry Hub price. The main contract is the Henry Hub Natural Gas Futures (NG) on the CME Group.
Henry Hub’s role in global LNG markets
Henry Hub (U.S.), TTF (Europe), and JKM (Asia) form the three core benchmarks that determine global LNG cargo flows. Every LNG shipment in the world effectively “decides” where to go based on which of these prices offers the best netback, which is the price at the destination minus transport costs.
When Henry Hub is low relative to TTF and JKM, U.S. exporters maximise output because selling LNG abroad is highly profitable. If TTF trades higher than JKM, European importers outbid Asia, and cargoes are diverted westward.
Conversely, when JKM surges above TTF, often due to Asian heatwaves or cold snaps, LNG flows pivot east toward Japan, Korea, and China.
In tight global markets, even small shifts between these three benchmarks can redirect dozens of cargoes and move prices worldwide. For traders, monitoring the spreads between HH, TTF, and JKM is critical. They reveal where marginal molecules are headed and which region is setting the global gas price.
Price Drivers and Volatility Factors
Henry Hub prices reflect the U.S. gas balance, but they increasingly react to global dynamics.
Domestic drivers
Storage: weekly EIA storage reports are one of the most market-moving events. A surprise in inventory draw or build often triggers sharp price reactions.
Production: shale gas output from regions like the Marcellus and Permian basins drives supply.
Weather: heating degree days (HDD) and cooling degree days (CDD) track temperature-related demand. Cold winters or hot summers tighten supply.
Infrastructure: pipeline constraints or maintenance can create local bottlenecks.
Global drivers
LNG exports: capacity changes at terminals like Freeport or Calcasieu Pass affect feedgas demand.
Arbitrage: if European TTF prices surge relative to Henry Hub, LNG cargoes are pulled to Europe, increasing U.S. exports and raising Henry Hub prices.
Policy: FERC approvals or export restrictions shift medium-term supply dynamics.
Henry Hub often alternates between backwardation and contango:
Backwardation = near-term futures are higher than later ones, which signals physical tightness.
Contango = later-dated futures are higher, which indicates oversupply or storage demand.
Understanding this curve structure helps traders align directional trades with the broader storage cycle.
Trading Henry Hub in Practice
Beyond standard futures, traders also use a range of Henry Hub-linked derivatives to fine-tune their exposure.
- Options on Henry Hub futures: these let traders take a view on volatility rather than direction. For example, buying a call option profits if prices rise or volatility increases, even if the trader doesn’t know which way the market will move. Options are widely used around high-risk events like EIA storage reports or major weather forecasts.
- Basis swaps: these price the difference between Henry Hub and another U.S. hub such as Waha (Texas) or Chicago. They help pipeline operators, producers, and regional utilities manage local price differentials caused by bottlenecks. When physical pipeline congestion builds, the basis widens. And basis traders profit by anticipating those moves.
- LNG-linked contracts: exporters and global desks use “Henry Hub + shipping spread” formulas to replicate the landed price of U.S. LNG in Europe or Asia. These trades connect the U.S. gas market directly to TTF and JKM.
Together, these tools allow traders to express three distinct views:
- Directional – betting on price movement via futures.
- Volatility – positioning for large swings using options.
- Relative value – trading one region or hub against another through basis swaps or LNG spreads.
Tip: start simple. Track how each of these markets reacts after Thursday’s EIA report or when pipeline maintenance hits the Gulf Coast. You’ll quickly see which instrument best fits your strategy and risk tolerance.
Technical Analysis Insights
Henry Hub exhibits textbook technical behaviour. Many traders use it as a model market to refine chart setups.
Among the markets covered on the Clever Markets dashboard, the Henry hub is by far the strongest mean-reverting market. This means that trends are short and revert quickly.
Classic trend-following strategies with trend and momentum tools are therefore typically a losing strategy. Mean-reverting strategies that rely on oscillators, key levels and candle patterns are more profitable, especially on the intra-day chart.
How Clever Markets Helps Traders Master Henry Hub
We turn technical analysis into a core strength for energy trading teams with our Energy TA Hub. Through systems, daily analytics, and strategic guidance, we help your desk outperform in volatile energy markets.
Clients are either experienced market players that wish to level-up their process, or are setting up their trading team and want to get started with best practices.