Since the start of the European gas crisis, the global gas benchmarks of JKM and TTF have diverged from Henry Hub gas prices. This dislocation stems from constraints in U.S. liquefaction capacity, preventing increases in gas exports—bringing on new supply has a lead time of three plus years—and the potential for closing arbitrage opportunities in the global market. Consequently, the factors currently shaping natural gas prices in the U.S. differ significantly from those in Europe and Asia, resulting in a very low correlation.

Nonetheless, certain common factors continue to impact both Henry Hub and other global gas markers. These include broader commodity price movements, such as oil and coal, as well as any disruptions to U.S. liquefaction infrastructure. These considerations hold significance for LNG market participants with exposure to both Henry Hub and global gas indices.

It’s crucial to assess the potential for a repeat of the convergence and higher correlation observed between Henry Hub and JKM/TTF during the summer of 2020. This convergence resulted from oversupply due to the COVID-19 lockdown, which induced low demand. This, in turn, prompted the need to curtail flexible supply, primarily from the U.S., given its contract flexibility and ability to push the gas into the liquid domestic market.

Forward prices suggest an increasing convergence of global gas spreads starting around the middle of the decade, as the next wave of supply enters the market. With any risk of global oversupply, Henry Hub's influence on global gas price formation may be amplified, supported by North American LNG's growing share of global supply (approximately 35% by the mid-2020s compared to around 20% in 2022).

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