TTF gas prices slump 11% on hopes of Chevron LNG settlement
Quantum Commodity Intelligence – Prompt European natural gas futures continued to row back from recent two-month highs Thursday, on optimism that industrial action from Chevron's Australian workers in the gas sector will be less disruptive than initially feared.
Although there has been no fresh updates on the talks, hopes remain high that a settlement can be reached before further escalation.
Earlier this week unions gave notice they will initiate work bans and 10-hour daily stoppages at Chevron's Gorgon and Wheatstone LNG projects from next week and escalate the action in subsequent weeks, which would threaten global gas supplies heading into the peak northern hemisphere winter.
Woodside Energy last week reached a settlement with unions that will keep gas flowing from the company's huge North West Shelf project in Australia, which had raised hopes a speedy deal could also be worked out with Chevron.
Benchmark TTF futures for Oct23 were around €35/MWh in late-afternoon European trading Thursday, down 11% on the day after prices reached almost €50/MWh earlier this month prior to the Woodside agreement.
Further along the curve, Nov23 was also down 6.5% at around €45.40/MWh, while the key winter contracts for Jan24/Feb24 were both down around 4% at close to €52.50-€53/MWh.
Possible strikes
About 500 workers at Chevron's Gorgon and Wheatstone LNG processing plants were joined Monday by Wheatstone's offshore platform personnel, who also voted unanimously for protected action, including possible strikes.
"These have a combined capacity of 24.5mtpa, around 6% of global supply. This is clearly still a risk to the market, particularly if we see a prolonged strike that would affect all of this capacity and if it runs deep into the Northern Hemisphere winter," said Warren Patterson, head of ING's commodity research.
Analysts have noted that talks between unions and energy companies often 'go to the wire' before a last-minute compromise is reached, which is a pattern regularly seen with Norway's offshore oil and gas workers.
Australia is not typically a supplier of LNG to Europe, but reduced supplies would mean that Asian buyers would increase competition with European buyers, likely causing a spike in global pricing.
"This is an upside risk to European gas prices, particularly if it were to occur over the heating season If the LNG supply, which Europe is more reliant on now, is also reduced, inventories would fall quicker through winter," added Patterson.
Despite a number Norwegian outages over the summer, European inventories are already over 90%, versus 79% at the same stage last year, and well ahead of the Commission's target of having 90% storage by 1 November.
"TTF volatility continues amid the Australian news, while fundamentals remain bearish EU stocks are nearly at 93%, with slow gas injections and rising LNG storage," said Kpler analytics Thursday.
