Density functional theory (DFT)-based simulations have been performed to provide electronic structure property correlation based reasoning for conceptualizing the effect of encapsulated methane molecule on the formation of methane hydrate cages, the role of methanol and ethylene glycol as inhibitor and the role of tetra-hydro-furan (THF) and cyclopentane as promoter of methane hydrate. Geometry optimization of 5¹² cage, 5¹²6² cage and 5¹²6⁴ cage with and without encapsulated methane and the cluster of 5¹² cage with ethylene glycol, methanol, cyclopentane have been performed by density functional theory using 𝜔B97X-D/6-31++G(d,p) method. Methane hydrate formation inhibition by methanol and ethylene glycol as well as methane hydrate stabilization by cyclopentane and tetrahydrofuran are critically analysed based on the interaction energy, free energy change, dipole moment and infrared frequency calculation. Calculation of free energy change for formation of methane hydrate with/without reagents at various temperature and pressure using optimized structure is reported here. It is observed that hydrogen bond between water molecules of clathrate 5¹² cages become stronger in the presence of cyclopentane and tetrahydrofuran but weaker/broken in the presence of ethylene glycol and methanol. Simulated results correspond well with experimental findings and can be useful for designing new inhibitor and promoter molecules for gas hydrate formation.