What Is Henry Hub?

Henry Hub is a pure gas pipeline located in Erath, Louisiana, that serves as a result of the official provide location for futures contracts on the New York Mercantile Alternate (NYMEX). The hub is owned by Sabine Pipe Line LLC and has entry to a lot of the primary gas markets in america. The hub connects to 4 intrastate and 9 interstate pipelines, along with the Transcontinental, Acadian and Sabine pipelines.

Understanding Henry Hub

The Henry Hub pipeline is the pricing degree for pure gas futures on the New York Mercantile Alternate. The NYMEX contract for deliveries at Henry Hub began shopping for and promoting in 1990 and is deliverable 18 months ultimately. The settlement prices at Henry Hub are used as benchmarks for the entire North American pure gas market and parts of the worldwide liquid pure gas (LNG) market.

Significance of Hub Pricing

Henry Hub is an obligatory market clearing pricing concept on account of it is based on the exact present and demand of pure gas as a stand-alone commodity. Completely different pure gas markets like Europe have fragmented hub pricing elements. This means pure gas prices are typically listed to crude oil, which can have very fully totally different present and demand parts affecting its worth. Makes an try are being made to develop European hub pricing elements inside the Netherlands and the UK, nonetheless this has proved powerful thus far ensuing from opponents from nationwide hubs. Asian pure gas markets are way more fragmented and have no outlined hub pricing degree, although Singapore want to serve this regional place. Consequently, all Asian pure gas prices are each listed to crude oil or linked to Henry Hub.

Henry Hub and Liquid Pure Gas

Henry Hub will also be utilized in provide contracts for LNG on a worldwide basis, no matter being a spot worth for pure gas that could be very specific to the North American gas market. Some world gas producers like Qatar and Australia favor to base the pricing mechanism of their pure gas deliveries on spot prices moderately than indexing to the price of oil. That may be very true when crude oil prices are falling. Gas producers can rely on Henry Hub as a provide of pure gas spot pricing to meet this need attributable to its big shopping for and promoting amount, clear pricing transparency, and extreme liquidity. Henry Hub prices are broadly quoted by futures exchanges and totally different media sources, so occasions to a contact can merely purchase this pricing data.