European natural gas jumped by the most since March of last year amid the possibility of worker strikes in Australia, highlighting market jitters over potential supply disruptions.
Benchmark futures settled 28% higher on a day of extreme volatility that saw the contract top €40 for the first time since June. Prices soared as much as 40% intraday. The daily increase was the biggest percentage gain since the early weeks of Russia’s war in Ukraine.
Traders are concerned about a long-lasting strike, with analysts at Citigroup Inc. predicting it could cause European gas and Asian LNG contracts for January to double.
Workers at Chevron Corp. and Woodside Energy Group Ltd. facilities in Australia voted to strike, which has the potential to disrupt LNG exports from the country, tightening the global market for the fuel. The exact timing of the industrial action — if it goes ahead — wasn’t immediately clear. Laborers could stop with seven days’ notice as early as next week depending on progress at a meeting on Thursday, the Australian Financial Review reported.
Asian buyers “are likely to bid up LNG imports” to replace Australian volumes if there are disruptions, which would affect Europe as well, said Nick Campbell, a director at consultant Inspired Plc. “LNG has become a baseload supply in the European gas mix, therefore any signs that this flow is at risk leads to support in price.”
Other bullish drivers have contributed to moves in gas recently. They include a drop in LNG imports to Europe last month and increased flows from the region to Ukraine, which has spare storage capacity. Potential delays in Norway’s seasonal maintenance also pose a risk.
It’s also possible that this week’s price surge caused a wave of position-covering by investors who previously bet on further declines in gas. Similar moves resulted in extreme volatility in June. Investment funds’ net-short positions in benchmark Dutch gas futures increased last week — after falling to the lowest level since January a week before, according to data released Wednesday by market operator Intercontinental Exchange Inc.
The surge signals there are still risks to gas supplies after last year’s crisis, even though the region’s inventories are unusually high for the season, providing some security that Europe is heading to the winter months in good shape. Industrial demand for gas remains depressed and sustained production cutbacks are one of the main reasons European gas prices have collapsed 50% this year.
