Gas prices in Europe collapsed by 25% after the cancellation of the Australian strike

Gas prices in Europe have collapsed by 25% over the past two days amid news that workers at Australia’s Woodside Energy have abandoned their strike at its LNG plant. However, the union of workers at two Australian Chevron LNG plants, on the contrary, voted to start a strike, the date of which has not yet been set. The beginning of the hurricane season in the United States may also affect LNG supplies. Analysts, however, do not expect a serious rise in prices in the short term.

According to the results of trading on the TTF site in the Netherlands on August 24, the cost of gas increased by 13.2% and amounted to €32.2 per 1 MWh ($360 per 1,000 cubic meters). At the beginning of trading, the drop was even more significant – up to 18%. A day earlier, quotes had already fallen by 14.2%, as market participants’ fears of possible interruptions in LNG supplies from Australia began to weaken. At the same time, on August 22, quotations for the first time since the beginning of summer exceeded $500 per 1,000 cubic meters.

The current dynamics is connected with the news about the cancellation of the strike scheduled for September 2 at the gas platforms of the Australian oil and gas company Woodside Energy. These are the offshore platforms North Rankin, Goodwyn Alpha and Angel, located in the northwest of Australia, which provide gas to the North West Shelf LNG LNG plant with a capacity of 16.9 million tons per year. Woodside representatives reached an agreement in principle with the union to change wages and working conditions.

At the same time, the trade union representing the interests of employees of Chevron factories, on the contrary, spoke in favor of holding a strike. We are talking about two LNG plants – Chevron Wheatstone Downstream (capacity 8.9 million tons per year) and Gorgon LNG (15.6 million tons per year). According to the Australian union, short-term (within 12 hours) and longer work stoppages, including the termination of LNG shipments, as well as an indefinite ban on overtime work at the facility, were supported by about 98% of workers. Uncertainty with strikes at three platforms, which account for about 10% of global LNG production, pushed Asian spot gas prices up more than 25% in August.

At the same time, the vote does not mean the inevitability of strikes at Chevron’s LNG projects. The union must now give Chevron at least seven days’ notice of the actual start date of the strike, allowing time for negotiations. The company said it will continue to take steps to maintain safe and reliable operations in the event of plant outages.

The beginning of the hurricane season in the US could create additional tension on the market. For example, Tropical Storm Harold, which initially formed as a hurricane, has already affected oil and gas operations on the southeast coast of Texas, as many of them have reduced production as a precaution. The volume of gas entering Cheniere Energy’s LNG terminal in Corpus Christi could have fallen by nearly 30% on August 23, to 1.5 billion cubic feet per day, according to Refinitiv. Enverus Intelligence Research experts suggest that in the event of a hurricane in the Gulf of Mexico, approximately 40% of oil and gas production will stop, and it may take about a week to restore indicators.

Natalya Porokhova, head of the Gazprombank Price Index Center, notes that the main fundamental factors affecting LNG prices in the world are still weak demand in Europe and significant gas reserves after the previous heating season, which made it possible to reach 90% of UGS occupancy in August.

At the same time, a shortage of capacities is expected in the LNG market in the medium term, as evidenced by the high activity of China and other Asian countries in the market of long-term LNG contracts in June-July, the expert believes.

According to the center, recent contracts were concluded with higher oil-linking ratios (slopes; reflect the ratio of LNG price to oil price) than on average in recent years.

Arikacapital’s strategist Sergey Suverov also notes that Europe is approaching the heating season, so that despite more than 90% full storage, price dynamics will largely depend on the weather, since other supply and demand factors are relatively stable. He emphasizes that a cold winter in the Northern Hemisphere could increase demand for LNG, which would directly affect prices in Europe.

Olga Mordyushenko