Henry Hub Location: Key Facts About Its Role in Natural Gas Markets

Henry Hub is a key component of the U.S. natural gas market, serving as the primary pricing point for natural gas futures and spot trading. Its influence extends beyond domestic markets, shaping global energy prices and contracts tied to U.S. gas benchmarks. Traders, utilities, and policymakers rely on Henry Hub for pricing, regulation, and financial derivatives, making it essential to understanding how natural gas prices are set and why it remains a central reference in energy markets.

Physical Infrastructure

Henry Hub, located in Erath, Louisiana, is a major natural gas distribution point. It connects multiple interstate and intrastate pipelines, allowing gas to move between production regions and end-user markets. The hub’s infrastructure includes pipelines, compressor stations, and interconnections that facilitate efficient transportation from production sites to storage facilities and consumers.

It links to major pipeline systems such as Transcontinental Gas Pipe Line (Transco), Columbia Gulf Transmission, and Texas Eastern Transmission. These connections make it a strategic transit point for gas moving from the Gulf Coast—one of the largest U.S. production regions—to demand centers in the Midwest and Northeast. The ability to access multiple pipelines enhances market liquidity, as gas can be redirected based on supply and demand.

Nearby underground storage facilities, including salt caverns and depleted reservoirs, help balance seasonal fluctuations in consumption. Excess gas is stored during periods of low demand and withdrawn when consumption rises, stabilizing supply during peak winter months.

Market Reference for Gas Pricing

Henry Hub is the primary benchmark for U.S. natural gas prices, influencing both physical and financial markets. Its proximity to major production areas makes it a logical point for setting a standardized price that reflects supply and demand. Buyers and sellers use Henry Hub pricing as a reference for contracts, ensuring consistency in transactions across regions.

Prices at Henry Hub are determined through market trading, with natural gas bought and sold on both a spot and futures basis. The most widely recognized pricing mechanism is the Henry Hub Natural Gas futures contract, traded on the New York Mercantile Exchange (NYMEX), part of the CME Group. These contracts allow market participants to hedge against price fluctuations by locking in future gas prices. The settlement price of these futures contracts is based on physical deliveries at Henry Hub, reinforcing its role as the central pricing point.

Spot prices reflect immediate supply and demand conditions and are influenced by pipeline constraints, weather patterns, and production levels. These prices, reported by the U.S. Energy Information Administration (EIA) and private market data providers, impact costs for utilities, industrial users, and energy traders, as many long-term contracts reference Henry Hub pricing.

Ownership and Regulatory Oversight

Henry Hub is owned and operated by EnLink Midstream, which specializes in natural gas gathering, processing, and transportation. EnLink maintains the hub’s infrastructure, ensuring efficient gas flow between interconnected pipelines. The company is responsible for maintenance, capacity management, and addressing disruptions that could impact gas flows.

Regulatory oversight falls under the Federal Energy Regulatory Commission (FERC), which governs interstate natural gas transportation. FERC sets tariff structures, approves rate filings, and enforces compliance with regulations designed to promote fair access and prevent market manipulation. The Louisiana Department of Natural Resources oversees intrastate natural gas operations within the state.

Pricing transparency at Henry Hub is reinforced by reporting requirements imposed on market participants. The U.S. Commodity Futures Trading Commission (CFTC) monitors trading activity to detect irregularities that could indicate price manipulation. Companies transacting physical gas at the hub must comply with reporting mandates that contribute to accurate market assessments used by traders, analysts, and policymakers.

Role in Derivatives Trading

Henry Hub serves as the foundation for a range of natural gas derivatives that help companies manage price risk. Futures, options, and swaps linked to Henry Hub allow producers, utilities, and traders to hedge against volatility or leverage market movements for speculative gains. These instruments provide liquidity and price discovery, ensuring that natural gas markets function efficiently despite shifting supply-demand dynamics.

The Henry Hub Natural Gas futures contract, traded on the CME Group’s NYMEX platform, is one of the most widely used derivatives. Each contract represents 10,000 million British thermal units (MMBtu) of natural gas and serves as a benchmark for both physical and financial transactions. Traders take long or short positions based on market outlooks, while commercial participants use futures to stabilize revenues or procurement costs. Options on these futures add flexibility, allowing market participants to hedge risk with defined cost structures.

Swaps tied to Henry Hub further expand hedging strategies by enabling counterparties to exchange fixed and floating prices based on index settlements. These contracts, often traded over-the-counter (OTC) or cleared through exchanges, are widely used by power producers and large industrial consumers to lock in energy costs.