What Is Henry Hub?
Henry Hub is a natural gas pipeline junction located in Erath, Louisiana. It's owned by Entergy and connects to four major interstate pipelines and nine intrastate pipelines, making it one of the most connected natural gas hubs in North America. This connectivity is why it became the official delivery point for NYMEX natural gas futures contracts.
When you hear "natural gas is trading at $3.50," that price almost always refers to Henry Hub. It's the reference point for natural gas pricing across the United States and increasingly globally, as US liquefied natural gas (LNG) exports connect Henry Hub prices to international markets.
The hub was named after a former CEO of Henry Oil Company who owned a gas station at the original pipeline intersection. Despite its humble origins, Henry Hub has become one of the most important commodity pricing points in the world.
How Henry Hub Prices Are Determined
Henry Hub prices are set by the intersection of supply and demand at the physical hub. Producers pump natural gas into the pipeline system, and buyers (utilities, power plants, industrial users, traders) purchase it for delivery. When supply exceeds demand, prices fall. When demand exceeds supply, prices rise.
The NYMEX futures market is where most price discovery happens. Traders buy and contracts for future delivery at Henry Hub, and the current futures price represents the market's collective view of what natural gas will be worth at a future date. The front-month contract (the nearest delivery date) is the most actively traded and is what people mean when they quote natural gas prices.
The spot price reflects what you'd pay for immediate physical delivery at Henry Hub. During normal conditions, the spot price and front-month futures price track closely. During supply disruptions, they can diverge significantly.
Weather: The Dominant Price Driver
Weather accounts for 60-70% of short-term natural gas price movements. This is because natural gas is the primary fuel for both heating in winter and electricity generation for air conditioning in summer. When a cold snap hits the Northeast or a heat wave hits Texas, demand spikes and prices follow.
The polar vortex of January 2014 sent natural gas prices from $3.30 to $6.15 per MMBtu in just two weeks. The Texas freeze of February 2021 caused spot prices to briefly spike to $400 per MMBtu at some trading points. Weather events create the most dramatic and profitable trading opportunities in natural gas.
The National Weather Service's 6-14 day outlook and the NOAA Climate Prediction Center's monthly and seasonal forecasts are the most watched weather indicators for natural gas traders. A forecast for below-normal temperatures in the Northeast during winter is almost guaranteed to push prices higher.
Storage Levels: The Market's Memory
The Energy Information Administration (EIA) publishes weekly natural gas storage data every Thursday. This report shows how much natural gas is in underground storage facilities across the United States. Storage levels indicate the balance between supply and demand over the preceding weeks.
When storage is above the 5-year average, prices tend to fall because there's a buffer against demand spikes. When storage is below the 5-year average, prices tend to rise because the market worries about having enough gas for winter. The storage report is the single most market-moving regular event for natural gas prices.
A storage injection that's larger than expected signals weak demand or strong supply, pushing prices down. A withdrawal that's larger than expected signals strong demand or tight supply, pushing prices up. Traders watch the storage report like equity traders watch earnings releases.
Production and Supply Factors
The United States is the world's largest natural gas producer, with output exceeding 100 billion cubic feet per day. Most of this comes from the Marcellus Shale (Pennsylvania, West Virginia), the Permian Basin (Texas), and the Haynesville Shale (Louisiana, Texas).
When production grows faster than demand, prices fall. When pipeline bottlenecks prevent gas from reaching markets, regional prices can diverge dramatically from Henry Hub. The Jones Act, which restricts shipping between US ports, sometimes creates regional price dislocations because natural gas can't easily move from the Gulf Coast to the Northeast by water.
Drilling rig counts, well productivity data, and producer earnings reports all provide clues about future production levels. A declining rig count usually signals future production declines, which supports higher prices.
LNG Exports: The Global Connection
The US has become the world's largest LNG exporter, with export capacity exceeding 14 billion cubic feet per day. This connects Henry Hub prices to global natural gas markets for the first time. When European or Asian natural gas prices spike due to supply disruptions (like the Russia-Ukraine conflict), US LNG exports increase, tightening domestic supply and pushing Henry Hub prices higher.
LNG export terminals operate at near-maximum capacity during winter heating season. Any outage at a major export facility (Sabine Pass, Cameron, Freeport) can temporarily reduce export demand and push Henry Hub prices lower. Conversely, new export capacity coming online increases structural demand for US natural gas.
Contract Specifications
| Specification | Detail |
|---|---|
| Exchange | CME Group (NYMEX) |
| Contract Symbol | NG |
| Contract Size | 10,000 MMBtu (million British thermal units) |
| Price Quote | USD per MMBtu |
| Tick Size | $0.001 per MMBtu ($10 per contract) |
| Trading Hours | Sunday-Friday, 6:00 PM - 5:00 PM ET (next day) |
| Settlement | Physical delivery at Henry Hub, Louisiana |
| Contract Months | 12 consecutive months plus seasonal contracts |
| Margin Requirement | ~$2,500-4,000 per contract (varies with volatility) |
How to Trade Henry Hub Natural Gas
The most direct way is through NYMEX natural gas futures. You need a commodities brokerage account with futures trading permissions. The margin requirement is typically $2,500-4,000 per contract, but you should maintain significantly more to handle volatility. Natural gas is one of the most volatile commodities, with daily moves of 3-5% being common.
For simpler exposure, natural gas ETFs track the front-month NYMEX futures price. The United States Natural Gas Fund (UNG) is the most popular. ProShares offers leveraged (BOIL) and inverse (KOLD) ETFs for traders who want amplified exposure or the ability to short natural gas without futures.
Energy company stocks provide indirect exposure. Companies like EQT Corporation, Antero Resources, and Chesapeake Energy produce natural gas and their stock prices correlate with Henry Hub prices. However, stock prices also reflect company-specific factors like debt levels, management quality, and production growth, so the correlation isn't perfect.
For more on commodity pricing benchmarks, see our comparison of Brent vs WTI crude price.
Historical Price Patterns
Natural gas has a strong seasonal pattern. Prices tend to bottom in late September/early October (before winter heating demand begins) and peak in January/February during the height of winter. The "shoulder seasons" (March-May and September-October) typically see the lowest prices as heating and cooling demand are both minimal.
The extreme volatility makes natural gas attractive to traders but dangerous for investors who don't manage position size carefully. The price can double in a few weeks during a cold winter and crash just as quickly when warm weather returns. Position sizing and stop-loss discipline are essential.
The long-term trend has been shaped by the shale revolution. The US went from a net natural gas importer to the world's largest exporter in about a decade, driven by hydraulic fracturing technology unlocking massive reserves. This structural supply increase has kept prices lower than historical averages, but export demand is creating a new floor.
Current Market Dynamics
As of 2026, the natural gas market is being shaped by three forces. First, growing LNG export capacity is creating structural demand that didn't exist a decade ago. Second, the energy transition is increasing electricity demand (data centers, EV charging, heat pumps), and natural gas is the marginal fuel for power generation. Third, production growth is slowing as shale basins mature and capital discipline limits drilling.
The interplay between these forces creates opportunities. If export demand grows faster than production, prices rise. If production growth outpaces export capacity additions, prices fall. Weather remains the wild card that can override fundamentals in the short term.
For a complete overview of energy commodity markets, explore our energy commodities hub.