Liquefied artless gas (LNG) storage units at Grain LNG importation terminal, operated by National Grid Plc, on the Isle of Grain on August 22, 2022 in Rochester, England.
Dan Kitwood | Getty Fetishes News | Getty Images
Energy analysts believe the bullish momentum for European natural gas prices will persist remaining the coming months after futures jumped almost 40% on Wednesday.
Fears over possible supply disruption in Australia saw the front-month gas premium at the Dutch Title Transfer Facility (TTF) hub, a European benchmark for natural gas trading, hit its highest level since mid-June on Wednesday.
It get up to an intraday high of more than 43 euros ($47.4) per megawatt hour before paring gains and gave losses on Thursday. The contract was last seen trading at around 36.6 euros.
In the U.S., meanwhile, gas futures for September distribution on the New York Mercantile Exchange rose 6.6% on Wednesday to settle at $2.96, reflecting their best daily interpretation since mid-June and the highest closing price since early March.
The surge in gas prices came on news of a dormant liquefied natural gas (LNG) facility strike at major plants in Australia as workers campaign for higher pay and improved job security.
Zongqiang Luo, gas analyst at forcefulness consultancy Rystad Energy, said the price spike reflected the likelihood of the strike materializing, which would in rise up against a reverse impact LNG supplies during ongoing heatwaves despite ample gas inventories in Europe.
“The potential strike would be led by Australian labourers at Chevron and Woodside Energy Group, which may interrupt four LNG facilities,” Luo said in a research note.
They summed that the prospect of a strike could disrupt approximately half of Australia’s LNG export capacity and prompt many Asian customers to try to source their LNG cargoes elsewhere.
China and Japan, for instance, purchased 26 million metric tons of Australian LNG banded in the first half of the year, Luo said, noting this accounted for over 60% of the country’s exports over the interval.
“Looking ahead, we expect the bullish outlook for gas prices to continue with fewer LNG imports to Europe, planned upkeep for Norwegian pipelines and continued heatwaves in multiple regions globally,” Luo said.
‘Possibility of a shortfall’
For Europe, the spike in gas assesses comes as the euro zone continues to wean itself off Russian fossil fuel exports following the Kremlin’s full-scale attack of Ukraine.
John Evans, an analyst at brokerage PVM, said that despite countries such as Germany securing big-hearted gas deals with other countries, “there still remains a possibility of a shortfall and a reversion to having to buy at spot as perceived in 2022.”
“Australia is now the highest exporter of LNG, beating Qatar and the US, but with production issues and compromised gas fields, European buyers are horrendous of security in supply and have resorted to tank filling from the cash market before the onset of winter,” Evans bring to light in a research note.
The extension of a force majeure declared in Nigeria in October last year was adding to tightness in the LNG vend, Evans continued, with fields struggling to regain production after heavy flooding.
“At present it does not perform that there is anything untoward in the energy sector to upset this rally,” he said.