The threat of disruptions to production at several Australian LNG export terminals because of strikes fuelled strong volatility at European gas hubs on 9 August, despite high mid-summer gas stocks.
The TTF front-month market touched €44/MWh during the 9 August trading session. It was down to €38.75/MWh by the market close, but this was still a day-on-day increase of close to 26pc, or just under €8/MWh. The contract was on track to close lower today as of about 16:10 BST.
The Dutch front-month market last moved that much in percentage terms on 1 November 2022, when December replaced November as the front month. Gas consumption in Europe normally ramps up substantially between the two months.
The value of TTF front-month gas changed by more than a quarter in a day on only a handful of occasions last year, when staggered reductions in Russian pipeline supply drove multiple price spikes, although price moves were frequently much larger in outright terms.
Fears of a major disruption to Australian LNG loadings, which would have a knock-on effect for Europe by forcing Asian buyers to procure replacement cargoes, drove the price rally, according to some trading firms.
LNG market participants have said it remains unclear how much supply could be disrupted, if the strikes proceed, although some suggested that the effect may be limited.
Reduced LNG supply availability elsewhere because of maintenance, a downward revision in forecasts of wind generation in Europe and projections of prolonged hot weather in parts of southern Europe all further supported prices.
EU gas stocks are exceptionally high for mid-summer, at nearly 87pc as of the morning of 9 August, according to data from EU body GIE. But the global gas market remains finely balanced thanks to much-reduced supply-side flexibility now that little Russian gas is entering Europe, meaning unexpected changes to the global supply-demand balance can have an amplified effect on prices.
Potential for multiple strike action
Prolonged disruption at Australian liquefaction terminals, as happened in the third quarter of last year at Shell's 3.6mn t/yr Prelude terminal, could boost competition between Asian and European firms for Atlantic-basin cargoes.
Some members of the Offshore Alliance (OA) union who are employees of Woodside — operator of the 16.3mn t/yr Northwest Shelf terminal — on 9 August voted in favour of protected industrial action. The approval legalises strikes under Australian law.
And the OA has made an application to Australia's Fair Work Commission to hold a protected action ballot of members who are downstream workers at Chevron's 8.9mn t/yr Wheatstone LNG, while a separate vote is proposed for certain employees at the 15.6mn t/yr Gorgon LNG plant.
The Northwest Shelf facility is also set to undergo planned maintenance later this month that will cut capacity at the five-train terminal by the equivalent of one train on 25 August-23 September.
An offtaker with term supply from Chevron's 8.9mn t/yr Wheatstone LNG facility has not received any updates from the supplier on the potential effect on their deliveries. The buyer expects one delivery about a month from now.
OA has informed Chevron that their workers could potentially go on strike in about September, if its workers also vote to back strike action, another Wheatstone offtaker said.
Protected action requires that a 120-hour notice period be given to the company and can include a range of actions such as refusing to load LNG carriers. Any decision to give notice to Woodside regarding action will depend on the progress of bargaining meetings scheduled on 10 August and 15 August, as well as further discussions with members on Woodside's North Rankin, Goodwyn Alpha and Angel platforms and majority support in any subsequent ballot, the OA said.
Woodside said it has contingency plans to deal with challenges to production. "Our employees have demonstrated a willingness over a number of years to work constructively with us to resolve issues and, despite the protected action ballot outcome, we are hopeful that this approach will continue," it said today.
