European TTF gas prices rally 10% as Australian LNG strikes edge closer

Quantum Commodity Intelligence – Prompt European natural gas futures rallied 10% Monday as the prospect of industrial action curtailing Australian LNG exports moved ever closer.

Unions have put Woodside, operator of the North West Shelf, on notice it will begin strike action next week if  there is no progress on the long-running talks on pay and conditions by Wednesday.

Benchmark TTF futures for Sep23 were trading around €40.50/MWh late afternoon Monday in Europe, a gain of around 10.5%, with prices up by more than a third since the industrial action was first mooted earlier this month.

Further along the curve Oct23 was up 7.5% on Monday at around €45.50/MWh, while the key winter contracts for Jan24/Feb24 were around 3.5% higher at €58.50/MWh.

Meanwhile, personnel at Chevron's Gorgon and Wheatstone LNG facilities, also represented by the Offshore Alliance union, are voting on possible strike action with the first results due later this week.

While Europe buys very little Australian LNG, any shortfall would force major Asian buyers, including Japan, South Korea and China, to compete more aggressively for US cargoes heading into the northern hemisphere winter.

"The global natural gas market should get more clarity around potential strike action at Australian LNG facilities this week. Over the weekend, workers at Woodside said they will give the company until the end of Wednesday to come to a deal - otherwise they will call industrial action," said ING Monday.

According to analysts, industrial action from both sets of workers could slash global LNG supplies by 10%.

Woodside's North West Shelf facilities have a capacity of around 16.7 million mt per annum (mtpa), equivalent to a little over 4% of global supply, noted ING, while Chevron's Gorgon and Wheatstone have a combined capacity of 24.5 mtpa.

The European Union has already reached its gas storage target for November with inventories up to 90% by mid-August, according to latest data from Gas Infrastructure Europe (GIE), but could Europe still be exposed by a colder-than-normal winter, say analysts.