European natural gas prices plunged as talks aimed at heading off strikes at Australian LNG facilities entered the final stretch.
(Bloomberg) — European natural gas prices plunged as talks aimed at heading off strikes at Australian LNG facilities entered the final stretch.
Benchmark futures plummeted as much as 18% before paring losses to trade about 11% lower. There’s still no update on which way talks will go, and traders are positioning themselves as negotiations are seen running late into the night in Perth.
The risk of disruptions to LNG exports from Australia, one of the world’s biggest producers, had sent Asian and European prices surging this month with prices settling on Tuesday at their highest since April. While the strikes at facilities owned by Woodside Energy Group Ltd. and Chevron Corp. could put as much as 10% of global LNG supply at risk, some traders consider the recent price moves overdone.
On Wednesday, Woodside said there was no update to report. The company and officials representing workers at its North West Shelf LNG facility are meeting in Perth, and if there’s no progress, strikes could begin as early as Sept. 2. Separately, staff at some Chevron facilities are also considering walkouts but that’s running on a separate timeline.
Read more: LNG Strikes in Australia Loom If No Progress in Talks Wednesday
While European prices are way below the levels of last winter, and stocks are nearly full, the market remains on edge after the supply shock that followed Russia’s invasion of Ukraine last year.
Funds turned the most bullish this month since the early weeks of the invasion, increasing net-long positions by the end of last week, according to data released Wednesday by Intercontinental Exchange Inc. That means any drop in prices could spur a further wave of selling.
Some consider the recent move higher overdone, even if strikes do end up going ahead.
There’s been an “overreaction globally” to possible strikes, and North Asian LNG inventories are “quite high,” Zoe Yujnovich, head of Shell Plc’s integrated gas and upstream business, told reporters Wednesday.
LNG exports from the US — a key provider of the super-chilled fuel — are currently more profitable to Europe than to Asia in October, November and December, according to BloombergNEF. That should encourage flows to head to Europe rather than Asia, easing supply concerns.
Dutch front-month futures, Europe’s gas benchmark, fell 11.4% to €38 a megawatt-hour by 1:45 p.m. in Amsterdam.
–With assistance from Anna Shiryaevskaya, Elena Mazneva and Stephen Stapczynski.
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