Resolution of Australia LNG strikes leads to relief in European gas futures

European natural gas prices experienced a decline following the resolution of strikes at major export plants in Australia, in an agreement reached between Chevron Corp. and labor unions. These strikes had disrupted the market for over a month. Chevron announced on Friday that the unions had informed the company of the suspension of industrial action at liquefied natural gas facilities. The company assured that it had maintained its commitments to both domestic and international customers throughout this period.

Benchmark futures in Europe initially dropped by up to 6.1% before recovering some of the losses. Additionally, Europe’s largest exporter, Norway, has been steadily increasing production after facing extended outages, with flows picking up again on Friday. This development has helped alleviate some concerns after weeks of high volatility.

While Europe typically doesn’t rely heavily on LNG imports from Australia, prolonged industrial action could have led to disruptions at Chevron plants, potentially tightening the global market for this super-chilled fuel. Although winter inventories in Europe are higher than usual, the market remains highly sensitive. Various risks, including outages in the US, adverse weather conditions, or potential disruptions to Russia’s limited gas exports via pipelines, could influence prices.

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Certain projects in Norway will continue into October. Additionally, traders are keeping a close eye on LNG shipments from the US, particularly after a decrease in flows to the country’s largest liquefaction terminal earlier in the week. There is also interest in how Russia’s ban on diesel and gasoline exports might have a broader impact on energy markets.

Recent short-term risks have led to a scenario this month where day-ahead prices occasionally traded higher than futures for October. Some European traders have even utilized gas from storage to address supply gaps, a practice that, while not unprecedented, is unusual when there isn’t yet a demand for heating.

Dutch front-month futures, the European benchmark, saw a 2.1% decline to €38.28 per megawatt-hour by 9:42 a.m. in Amsterdam. Despite recent uncertainties, the contract is still set for a weekly increase. The UK equivalent also experienced a 2.2% decrease on Friday.