TTF gas extends gains as Chevron LNG strike talks deadlocked

Quantum Commodity Intelligence – European natural gas futures were sharply higher Monday with Australian supplies of LNG set to drop amid the increasingly acrimonious dispute between Chevron Australia and workers represented by the Offshore Alliance union.

Talks broke down Friday and while unions have said they will ensure critical personnel during industrial action at Wheatstone and Gorgon gas projects to maintain domestic gas supplies, LNG exports are expected to suffer coming into the critical northern hemisphere winter.

Benchmark TTF futures for Oct23 were around €36.40/MWh in late-afternoon European trading Monday, up over 5% for a second session, although prices had eased back from the earlier peak of €37.95/MWh.

Further along the curve, Nov23 was up around 2.5% at €45.40/MWh, while the key winter contracts for Jan24/Feb24 were both nearly 2% higher at over €52/MWh.

Industrial action is expected to escalate over the week including a rolling continuous strike scheduled for 14-29 September, which will almost certainly impact LNG exports.

The 10-hour stoppages to date have so far not impacted production, indicated government data.

Options

According to local media reports, the West Australian government is looking at options to at least defer the industrial action, although this could serve only to harden the resolve of unions.

Chevron is also examining is options via complex new labour laws introduced last year, having filed an 'intractable bargaining declaration' via the Fair Work Commission.

About 500 workers at Chevron's Gorgon and Wheatstone LNG processing plants have been joined by Wheatstone's offshore personnel. 

Benchmark North Asian LNG futures also rallied with the Platts JKM for October assessed at $13.342/mmBtu on Friday, up over 5%, while JKM futures posted further gains on Monday.

Sources said spot LNG buying from major North Asian consuming countries has been tepid with inventories already high, but so far have been reluctant to re-sell term cargoes amid the uncertainty.    

Asian markets also remained in a relatively steep contango with JKM futures for the key Jan24/Feb24 months in the $17.50-18/mmBtu range on Friday.