After years of being more or less isolated from the rest of the world, U.S. benchmark natural gas prices are becoming an influential force in shaping the structure of many contracts on the global LNG market.
The price at Henry Hub in the United States will give increasingly important price signals to the regional LNG and natural gas prices in Asia and Europe due to the sheer scale of rising U.S. LNG exports and the growing share of American LNG in the imports of buyers in Europe and Asia.
The U.S. benchmark natural gas price is now taking center stage on the global market as buyers are comparing the Henry Hub-indexed long-term contracts from U.S. shale production and export projects with the available oil-indexed contracts from conventional LNG projects. Currently, the Henry Hub-indexed contracts are cheaper and buyers prefer them due to the flexibility of cargo destinations.
But if the Henry Hub prices see a structural shift higher in the coming years, the contracts linked to the U.S. benchmark could lose some of their attractiveness—especially if there is plenty of supply globally.
U.S. natural gas prices could rise in the coming decade more than previously forecast due to expectations of increased domestic demand from the power sector, which will be called upon to deliver electricity supply to data centers.
The flexibility of U.S. natural gas producers will be key to keeping the domestic market fairly balanced.
Whatever the price of Henry Hub will be ten years from now, it will be an important force driving the contracting and pricing on the global LNG market, analysts say.
With Europe seeking LNG to replace Russian pipeline gas and Asia looking for more gas supply, the U.S. Henry Hub prices are no longer isolated from the global market.
US LNG Export Boom
U.S. LNG supply will play a key role in the coming global wave of supply from 2025-2027, with the U.S. and Qatar set for the biggest increases in LNG exports. The market share of North American LNG supply is set to rise from 22% in 2023 to 34% by 2030, with volumes growing by 116 mtpa, analysts at London-based consultancy Timera Energy wrote this week.
“The variable production cost of most of this North American liquefaction capacity is closely linked to the benchmark US Henry Hub price,” the consultancy said.
“This means a strong increase in the influence of the Henry Hub price signal on the global LNG market across the next 5 years.”
While the Henry Hub price has diverged from LNG prices in Asia and Europe since 2020, this is expected to change in 2026, when the new wave of global LNG supply ramps up.
“As the LNG market shifts towards an oversupplied regime, HH prices play a key ‘soft floor’ support role,” Timera Energy said.
US Natural Gas Market
In recent years, U.S. natural gas prices have remained relatively low – except for brief spikes during output constraints in winter freezes – despite the continued growth of U.S. LNG exports.
The key reason for this has been the flexibility of U.S. natural gas producers that could act and have acted, in response to market demand and conditions.
For example, earlier this year, producers slashed output in response to multi-year low prices. But they are also looking beyond the current slump, preparing to turn on more output by flexible operation of their inventory of wells.
Producers are stocking up inventories of wells ready to start pumping – or to be turned in line – as soon as prices rebound. Producers expect U.S. natural gas prices to recover next year amid growing demand for LNG exports and new LNG export plants that are slated to begin operations in 2025.
In the medium to long term, there are three key risks that could undermine the flexibility of U.S. natural gas producers, according to Timera Energy. These are the potential decline in shale quality, rising cost of capital, and the expected jump in U.S. LNG exports.
“There is also the risk of a material increase in US gas demand, e.g. from datacenter load growth which draws on gas-fired power,” the consultancy noted.
Other analysts also expect AI and data centers to draw more natural gas volumes to the power sector to meet surging demand.
The U.S. gas demand growth threatens to push up the Henry Hub gas price, Wood Mackenzie’s top gas and energy analysts said in May.
Two years ago, WoodMac expected “Henry Hub prices would stay cheap as chips for the foreseeable future, underpinning US LNG’s competitiveness.”
But the changing dynamics in U.S. power and gas markets, with expectations of much higher gas demand from power, has led WoodMac’s team to take a more bullish view on Henry Hub prices in the medium to long term.
Wood Mackenzie now expects total U.S. gas demand to increase by 30 bcfd (or 300 bcm) by the early 2040s, compared with a previous forecast of growth of 13 bcfd (130 bcm).
Goldman Sachs, for its part, expects incremental U.S. data center power demand to drive about 3.3 billion cubic feet per day (bcf/d) of new natural gas demand by 2030. This estimate assumes gas provides around 60% of the roughly 28.7 GW of total data center power demand expected through the rest of the decade and implies a 10% increase in the amount of gas consumed in the power market compared to today, Goldman Sachs said in an April report.
“More notably, this represents a ~50% increase vs. our prior growth expectations for power demand for gas – and adds to the broader constructive backdrop for gas demand growth alongside new LNG export capacity, coal plant retirements, and renewables backstopping,” Goldman Sachs analysts said.