In this commentary, Divyesh Desai examines some of the industry’s most widely held assumptions about Henry Hub pricing and US LNG contracts. The analysis questions whether US LNG is as cheap, flexible and low-risk as commonly believed, and explores the market dynamics that could reshape future pricing expectations.
Cheap. Flexible. Stable. The swing supplier. Free of oil.
Five beliefs the market prices into 20-year contracts. The data breaks all five and the cost they hide lands on the producer, not buyer.
1) “It is cheap”: only the best rock is cheap
On paper it stays cheap – the EIA sees HH ~ $3.60 in 2026 and $3.46 in 2027 because Permian gas (a free byproduct of oil) and the best Haynesville rock keep storage full. That tier is finite, and the US is converting gas to LNG faster every year – feed gas up 9% in 2026, 11% in 2027 (EIA).
The next molecule is Tier 2: deeper & costlier that needs above $4/$4.5, not $3.
“Cheap” is fragile. In January the EIA put 2027 at $4.60; by June, it cut it to $3.46 – only because oil drilling threw off more associated gas. Let the oil soften, and the cheap story goes with it.
2) “It is flexible and so it is low-risk”
Henry Hub is ~$3. JKM is ~$18.75. The index linked is a sixth of the price being sold – liquefaction, freight and the spread are the rest. You can hedge the small, liquid leg easily – HH churns ~55x throughput (TTF ~20x). But you can’t lock the spread, which is your entire margin. Flexibility you can’t hedge is open risk.
3) “US LNG is the market’s swing supplier”
It swings destination, not volume. FOB lets a buyer change where a cargo goes – it doesn’t let a plant produce less. Project finance prohibits the swing. Trains are built on non-recourse debt against 20-year SPAs; the liquefaction cost is sunk, so exports continue regardless – the plant must run to service the loan. The real swing producer can hold back – Qatar, insulated from a spot collapse.
4) “Henry Hub is a stable & transparent benchmark”
Transparent – yes. Stable – no. It hit a record $7.72 monthly average in January 2026, then fell below $3 within three months. Its all-time intraday high was $9.85, in 2022. Term contracts settle on the monthly average – so one cold week moves what buyer pays.
5) “HH-linking frees the buyer from oil volatility”
It does delink from oil – but it links you to the US instead: power demand, AI/data-centre load, storage, weather. Every new LNG train pulls the same Tier 1 molecule, and the EIA ties its expected HH upside specifically to LNG and data-centre demand. Volatility doesn’t go – It is just swapped with a shallower, country-specific market.
The market priced US LNG on five comforting beliefs. What matters is how are you pricing it!!!
Source: Divyesh Desai, Enara Energy (LinkedIn post)
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