TELF AG examines the European Natural Gas Market
Prices Drop Amidst Labor Agreements and Record Reserves – September 4, 2023
In recent developments, European natural gas futures have dropped significantly by 13% to approximately €32 per megawatt-hour. This decline extends a 14% reduction from the previous session. This sharp decrease in gas prices can be attributed to several key factors, including a preliminary agreement between Woodside Energy and worker unions at a major Australian liquefied natural gas (LNG) project.
The primary driving force behind this price decline is the tentative resolution between Woodside Energy and labor unions at the Australian LNG project. This agreement holds the potential to avert supply disruptions from Australia, the world’s largest exporter of liquefied natural gas. The market has reacted strongly to the prospect of a stable supply chain, leading to a substantial decrease in gas futures prices.
However, it’s not just labor agreements influencing the natural gas market. Europe’s fuel reserves are currently at an astonishing over 90% capacity, marking the highest levels on record for this time of year. This stockpile exceeds the European Union’s target to reach these storage levels by November 1st. Several European countries have surpassed this target, including Germany, Italy, Spain, and the Netherlands. In contrast, French gas inventories lag slightly behind at 86.8%.
The exceptional surplus in natural gas reserves is contributing to the downward pressure on prices. With such ample supply on hand, market dynamics have shifted in favor of consumers, resulting in the recent price drops.
Moreover, another development that could potentially impact the gas market is the scheduled worker ballot for Chevron’s Gorgon and Wheatstone downstream facilities. The voting process for this worker ballot is anticipated to conclude by August 28th. The outcome of this ballot could have ramifications for gas production and supply, depending on the decisions made by the workers.
In summary, European natural gas futures have experienced a significant decline, primarily driven by the preliminary agreement between Woodside Energy and worker unions in Australia and the surplus of gas reserves in Europe. These developments are indicative of the complex and interconnected nature of the global natural gas market, where labor agreements and supply levels can have substantial effects on prices and market stability. The upcoming worker ballot for Chevron’s facilities adds an element of uncertainty to the market, making it a space to watch closely in the coming weeks.