NYMEX LDS or daily spot natural gas contract structure: which is better?

Natural gas can be bought under several different contract structures. This piece focuses on two index-based approaches, namely the NYMEX Last Day Settlement and the Henry Hub daily spot, and highlights some of the key differences between the two.  

The NYMEX Last Day Settlement (LDS), or final settlement price, is determined in the last half hour of trading three business days prior to the end of each month by CME, one of the largest futures exchanges in the world. Each month, the nearest future month, known as the prompt month contract, ceases to be a future contract on the NYMEX, and the LDS price is determined. For example, on March 27, 2026, CME set the April 2026 NYMEX LDS at $3.095/MMBtu. This price was then used for all supply contracts indexed to NYMEX LDS for April deliveries. 

The second index option for comparison is the spot or cash market price, which is for immediate, daily delivery, rather than a point in the future. While there are a multitude of regional spot prices, the spot price comparable to the NYMEX price is the Henry Hub (HH) spot price, which matches the LDS price of the same location. Unlike the LDS Index, which is determined monthly, the HH spot price is determined daily, except on weekends and on holidays.  

The chart below shows a comparison of the HH NYMEX LDS monthly price against the HH daily spot price of natural gas (NGI and CME data). Both indices are impacted by supply and demand factors that are anticipated or known.  

Highlighted on the chart in orange ovals are longer price declines, when the daily-priced spot structure tends to favor buyers. By contrast, the blue ovals highlight periods of sharp increases, either extended run-ups as seen in the Q1 2022 rise, or shorter-term, weather-driven spikes, when spot underperforms and volatility bites. Each winter carries a risk of such a spot price blowout.  

In January 2026, Winter Storm Fern caused an extreme spike of the HH spot price, which peaked at $30.57/MMBtu on March 27, as indicated by the blue oval on the far right. Of the 150+ spot price indices published by NGI, over half of those points hit all-time high spot price records at some point in the last week of that month, a sign of the widespread nature of the storm. Coming late in the month, the storm also coincided with the NYMEX LDS date for the February 2026 contract, which pushed the monthly priced NYMEX LDS structure up to $7.46/MMBtu (as shown by the orange oval on the far right), the highest February LDS since 2008, and setting up a back-to-back whammy for buyers that had both structures in their portfolio.  

In summary, neither NYMEX LDS nor Henry Hub spot will consistently deliver lower costs; each performs better under different market conditions. The spot price structure is more beneficial during longer periods of price decline but is much more exposed to winter spikes. NYMEX LDS, conversely, performs better during longer-term price increases and is less volatile; however, it locks buyers into a single monthly price, which can be painful if a large move occurs near the end of a month, when LDS is set. For these reasons, a well-developed strategy that includes some fixed pricing mitigates the risk of both structures, replacing index exposure with a known price, which is often the right move for many buyers.  

If you have an interest in developing or changing your current strategy, please reach out to your Trio advisor.