European gas prices rise on growing prospect of Australian LNG strike

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European natural gas prices jumped in volatile trading on Monday as the prospect of a strike at a liquefied natural gas producer in Australia intensified fears of disruption to global supplies.

Prices of TTF, the European benchmark, rose as much as 9.1 per cent in early trading to €41 per megawatt hour ($13 per million British thermal units), before falling back to steady at 3.3 per cent higher.

The early spike came as workers seeking higher pay and better job security at one of Australia’s key LNG export plants warned that production could soon be halted.

On Sunday, Offshore Alliance, a group representing two labour unions, said workers had “unanimously endorsed” giving Woodside Energy seven working days’ notice if its claims were not resolved by close of business on Wednesday. The notice relates to Woodside’s North West Shelf (NWS) facilities, which account for about 4 per cent of global LNG supply.

LNG from Australia rarely makes it directly to European shores but a possible disruption to global supplies has kept European traders on edge for several weeks.

If buyers of Australian seaborne gas in Asia need to hunt for alternatives, it will pitch them directly into competition with Europe, which has come to rely on LNG after Russia slashed its pipeline gas exports to the region following its invasion of Ukraine.

Traders for now are having to weigh the potential LNG supply disruption against Europe’s ample reserves of gas — last week the EU hit its storage target more than two months ahead of schedule.

Analysts at ING said in a note that “any strength in prices should be shortlived”, given the high amount of gas the EU had already stored.

They added that significant LNG volumes from the three plants would need to be shut “for a prolonged period in order to lead to a significant change in European fundamentals, at least over the next month or two”.

The Offshore Alliance will also finalise a strike vote at the Chevron-operated Wheatstone and Gorgon LNG ventures by August 28. The three plants, which account for about 10 per cent of global LNG supplies, could all go on strike by early September.

“Woodside tried every tactic it could think of to avoid bargaining with its workers as a collective, but in the end the company failed to maintain the status quo it liked — one where what the company says goes,” said Brad Gandy, for the Offshore Alliance.

The EU’s gas storage was 91 per cent full as of Saturday. The near-full storage has helped keep European natural gas prices in check, which is down significantly from last summer’s highs of over €300/MWh, at the height of the energy crisis.