European Gas Extends Rally on Risks From Australia to Norway

(Bloomberg) -- European natural gas prices rose for a third straight session as strikes continue at key export sites in Australia and Norway struggles to exit lengthy maintenance measures. 

Benchmark futures gained as much as 9.8% on Monday after workers began partial strikes late last week, threatening operations that supplied about 7% of the world’s liquefied natural gas in 2022. Chevron Corp., which operates the affected facilities, has applied to a labor regulator to help resolve its dispute with unions.

In addition, Norway’s largest gas field is entering its third week of works and will face more capacity restrictions than initially expected. Supply risks have held the European gas market in suspense for more than a month, triggering price volatility and highlighting dependency on global flows of the fuel.  

Attention is now on key dates this week. On Tuesday, Australia’s Fair Work Commission will hear Chevron’s cases. On Thursday, full walkouts are set to begin if no agreement is reached, according to the unions.  

Given the importance of the facilities for Northeast Asian buyers, “we anticipate Chevron is under pressure to accelerate resolution,” said Kaushal Ramesh, vice president covering gas and LNG analytics at advisory firm Rystad Energy. More than 68% of capacity is contracted to buyers in the region, and actual exports to Northeast Asia account for more than 80%, he added. 

Norway, Freeport 

Supplies elsewhere are also under pressure. In Europe, Norwegian pipeline gas exports remain curbed amid maintenance at key facilities, with a larger impact from works at the giant Troll than previously expected. In the US, flows to the Freeport LNG export plant declined. 

Dutch front-month futures, the continent’s gas benchmark, increased  to € a megawatt-hour by 11:36 a.m. in Amsterdam. The UK equivalent gained . 

For now, the region is relatively well-protected from disruptions, with European storage sites filled 94% on average. The perimeter — which includes Northwest Europe, Italy and Austria — is forecast to end the winter with gas inventories 44% full, according to BloombergNEF.  

In addition, expectations for a warm September and mild October in the northwest mean the start of the heating season isn’t yet on the horizon. 

“The potential impact of the strikes is likely the only bullish element in the near-term market, given we have now entered the pre-winter shoulder season and other indicators are bearish in both Europe and Asia,” Ramesh said. 

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