Natural Gas
Natural gas prices are driven by weather, storage, production and LNG exports. Learn Henry Hub futures, the storage report, seasonality and why gas is so volatile.
Natural gas heats homes, fuels power plants and feeds industry. It is one of the most volatile major commodities, often moving 5% or more in a single day, because demand depends heavily on weather and supply cannot quickly adjust. In the US, the benchmark is Henry Hub natural gas, traded as NYMEX futures. Globally, liquefied natural gas (LNG) links regional markets such as Europe's TTF and Asia's JKM. Understanding storage, weather and seasonality is essential for trading gas.
The benchmarks#
| Benchmark | Region | Units |
|---|---|---|
| Henry Hub (NYMEX NG) | United States, Louisiana delivery point | Dollars per million British thermal units (MMBtu); 10,000 MMBtu per contract |
| TTF (Title Transfer Facility) | Europe (Netherlands) | Euros per megawatt hour |
| JKM (Japan Korea Marker) | Asian LNG | Dollars per MMBtu |
| NBP | United Kingdom | Pence per therm |
A $0.001 tick on NYMEX natural gas is worth $10 per contract, so a $0.10 move is $1,000.
What drives natural gas prices#
| Driver | Effect |
|---|---|
| Weather | Cold winters and hot summers raise demand for heating and power |
| Storage levels | Compared with the five year average, a key gauge of tightness |
| Production | US shale output from regions such as the Appalachian (Marcellus) and Permian basins |
| LNG exports | US export capacity links Henry Hub to global prices |
| Power sector | Gas competes with coal and renewables for power generation |
| Hurricanes | Can disrupt Gulf Coast production and LNG terminals |
The weekly storage report#
The US Energy Information Administration publishes the Weekly Natural Gas Storage Report every Thursday at 10:30 a.m. Eastern. It shows the change in working gas in underground storage. Prices often move sharply when the reported change differs from analyst expectations.
Seasonality#
- Injection season (April to October): gas flows into storage.
- Withdrawal season (November to March): storage draws to meet winter demand.
- Winter premium: winter contracts usually trade above summer contracts.
- Shoulder months (spring and autumn) have lower demand.
The March April spread, the switch from withdrawal to injection, is known as the "widow maker" because of its violent moves and its role in the 2006 collapse of the hedge fund Amaranth Advisors, which lost about $6 billion in weeks on natural gas spreads. See Seasonality in Commodities, Calendar Spreads in Futures and Amaranth Advisors.
The shale revolution and LNG#
Horizontal drilling and hydraulic fracturing unlocked huge US gas supplies from the late 2000s, pushing Henry Hub prices down and turning the US into the world's largest LNG exporter by 2023. LNG exports now connect US prices to European and Asian demand, though transport costs and capacity limits mean regional prices can still differ widely. In 2022, European TTF prices exceeded €300 per megawatt hour while Henry Hub peaked under $10 per MMBtu. See Energy Markets.
Why natural gas is so volatile#
- Weather dependence: forecasts can change daily.
- Limited short term supply flexibility.
- Storage constraints: when storage is very low or very high, prices react strongly.
- Regional bottlenecks: pipelines and LNG terminals limit flows.
Trading natural gas#
- Futures and options on NYMEX, plus TTF futures on ICE Endex.
- Calendar spreads to trade seasonality.
- ETFs such as natural gas futures funds, which have historically suffered heavy losses from contango and roll costs. See Roll Yield.
- Weather based analysis: traders follow heating and cooling degree day forecasts.
Frequently asked questions#
What is Henry Hub?#
A natural gas pipeline hub in Louisiana and the delivery point for NYMEX natural gas futures, the main US price benchmark.
When is the natural gas storage report released?#
The EIA releases it every Thursday at 10:30 a.m. Eastern time, with occasional schedule changes around holidays.
Why is natural gas so volatile?#
Because demand depends on weather, supply responds slowly, and storage levels and regional bottlenecks can amplify imbalances.
Next, learn about refined products in Gasoline and Heating Oil.
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Mentioned in
- Crude OilCommodities
- Commodities TradingMarkets and Instruments
- ContangoFutures
- Weather and Agricultural DataData and Alternative Data