European natural gas futures spiked for the second time in less than a week, with market tensions running high over the possibility of strikes in Australia that could severely tighten the global market.
(Bloomberg) — European natural gas futures spiked for the second time in less than a week, with market tensions running high over the possibility of strikes in Australia that could severely tighten the global market.
Discussions on Tuesday between union officials and Woodside Energy Group Ltd., one of the two companies operating the affected liquefied natural gas facilities, yielded no firm outcome to the labor dispute.
Traders are closely monitoring the talks for any sign of resolution — or timetable if the strikes move forward — as the work stoppage threatens to disrupt as much as 10% of global LNG supplies. While Europe rarely buys Australian gas, it would need to compete with Asia for a limited amount of cargoes, with the winter heating season starting in less than two months.
The benchmark Dutch contract settled 13% higher after soaring as much as 18% earlier Tuesday. Futures surged 28% on Aug. 9, amid the growing possibility of walkouts at several LNG facilities.
“Any signs of strike action going ahead could cause a bullish run up to and into the start of winter over fears of supply disruptions,” analysts at Inspired Plc wrote in a note.
While the discussions resulted in some progress, the two sides weren’t yet close to an agreement ahead of a potential strike decision for Friday, energy news provider Montel reported. A Woodside Energy spokesperson said they haven’t been notified of industrial action as yet.
“A full resolution is unlikely to be reached without the full support of the Offshore Alliance, and recent social media posts from the union indicate that we are still some way away from this,” said Leo Kabouche, an LNG analyst at Energy Aspects Ltd. in London.
With the threat of possible strikes looming, the Gorgon facility operated by Chevron Corp. in Australia is already holding back from some spot market sales, traders with knowledge of the situation told Bloomberg News.
Separately, natural gas deliveries to the Corpus Christi liquefaction terminal in the US fell to 1.6 billion cubic feet a day, according to BNEF’s LNG Feedgas Model, adding to strains on global supplies.
Even though Europe’s gas inventories are well-above the season norm, the region is vulnerable to possible delays in the summer maintenance schedules of major producers, such as Norway. Traders are also eyeing a rise in temperatures in southern Europe, Germany and France that could lead to a spike in demand for cooling.
Dutch front-month futures, Europe’s gas benchmark settled at €38.81 a megawatt-hour. The UK equivalent contract also gained.
–With assistance from David Stringer, Ruth Liao and Brian Wingfield.
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