European Gas Prices Rise in Response to Australia LNG Workers’ Demand 

European natural gas prices have risen as workers at a key export project in Australia prepare for a strike that could disrupt global supplies in the run-up to winter. 

Disruptions in Australia risk affecting 10% of global liquefied natural gas shipments, a scenario that has European markets on edge since the strike discussions began earlier this month. The region is still reeling from last year’s energy crisis, during which Russian supply cuts left it vulnerable to changes in the tight global market.

Labor unions warned over the weekend that if no agreement is reached in wage talks with the plant’s operator, Woodside Energy Group Ltd., industrial action may begin as soon as September 2, sending benchmark gas futures up as high as 18% on Monday. The threat of strikes has escalated as a result of the ultimatum, according to ANZ Banking Group Ltd. strategist Soni Kumari. 

“Any rush for replacement volumes could spark a bidding war,” she warned. 

While gas prices remain far below the peak of last year’s crisis — Europe is well-stocked for winter and rarely receives gasoline from Australia — merchants are concerned that reduced fuel supplies to Asia would increase competition for alternative cargoes.

Initial reports on probable strikes earlier this month lifted intraday prices by much to 40%, illustrating the strength of market jitters as Europe prepares for winter. It has also had to contend with outages in Norway, its main producer, while traders have become more bullish. Workers at Chevron Corp. plants in Australia are also voting on prospective walkouts. 

While more talks on Wednesday might provide additional details later this week, analysts at ING Groep NV believe the price increase will be short-lived for the time being due to Europe’s large gas storage. A “significant change in European fundamentals” is only possible if a large portion of Australian capacity comes offline for an extended period of time — at least a month or two, according to the analysts. 

According to Saul Kavonic, an energy analyst at Credit Suisse Group AG, there is still hope for a resolution because the parties concerned are likely to be aware of potential implications’ severity. According to unions, a similar strike at Shell Plc’s Prelude facility in Australia a year ago lasted 76 days and resulted in an estimated $1 billion in missed production. 

“Everyone involved has learned from Prelude last year and does not want to see it repeated,” Kavonic added.

By 9:45 a.m. in Amsterdam, Dutch front-month futures were 9.7% higher at €39.95 per megawatt-hour. The identical contract in the United Kingdom gained 11% as well.