The global liquefied natural gas (LNG) supply could be disrupted if workers at Australia's Woodside Energy decide to strike due to unresolved labor disputes with the company. On Tuesday, European natural gas futures surged by as much as 18%, reaching a peak of 40.7 euros per megawatt-hour.
Last Wednesday, European natural gas prices skyrocketed by 40%. This sharp increase on Tuesday seemed to mirror the tumultuous fluctuations in gas prices that Europe experienced a year ago. Is this the new normal for European natural gas prices? More analysis can be found in "Why Are European Natural Gas Prices Surging Again?".
Reports suggest that while Woodside Energy and the union made some progress in their discussions on Tuesday, they're still far from reaching an agreement. Therefore, the proposed strike on Friday might still take place.
Such a strike poses a risk of interrupting as much as 10% of global LNG exports. Even though Europe doesn't frequently purchase Australian natural gas, the European Union might need to compete with Asian countries for alternative LNG sources.
A British analyst noted that preliminary negotiations between the union and the LNG company's shareholders haven't yielded significant results, suggesting the chances for a comprehensive solution are slim.
A spokesperson for Woodside Energy mentioned they haven't received any official strike action notification from the union.
Some experts believe that fears of LNG supply interruptions might cause a significant surge in European natural gas prices before the heating season starts.
While Europe's current gas storage levels are significantly above the usual levels for this season, the region is vulnerable to potential delays in summer maintenance plans from major producers like Norway. Energy traders also anticipate rising temperatures in Southern Europe, Germany, and France, which could lead to a surge in cooling demand and accelerated depletion of Europe's stored natural gas.
PVM broker John Evans pointed out that even though countries like Germany have secured large natural gas deals with other nations, there's still a possibility of shortages, and they might find themselves in a position similar to 2022, where they had to rely on spot market purchases.
Evans further elaborated in a research report that Australia has surpassed Qatar and the U.S. to become the largest LNG exporter. However, due to production issues and damages to gas fields, European buyers are concerned about supply security and are looking to bolster their stocks from the spot market before winter hits.
