European natural gas prices plunged as traders gauged the state of crucial negotiations to avoid strikes at Australia’s biggest export facility for the fuel.
(Bloomberg) — European natural gas prices plunged as traders gauged the state of crucial negotiations to avoid strikes at Australia’s biggest export facility for the fuel.
Benchmark futures fluctuated wildly — briefly plummeting as much as 18% before paring the loss — after the contract on Tuesday settled at its highest level since April. The sharp moves highlight extreme nervousness in the market as traders await the outcome of the talks.
Woodside Energy Group Ltd. said there was no update to report. The company and officials representing workers at its North West Shelf LNG facility are meeting in Perth, with discussions expected to run well into the evening. If there’s no progress, strikes could begin as early as Sept. 2.
Separately, staff at some Chevron Corp. facilities are also considering walkouts. The possibility of industrial action in Australia risks disrupting as much as 10% of global liquefied natural gas supplies, just as Asia and Europe prepare for the winter heating season.
Read more: LNG Strikes in Australia Loom If No Progress in Talks Wednesday
The recent price moves have been exacerbated by trader positioning. In June, when investment funds boosted their bets that gas prices would decline, traders had to cover those short positions as outages in Norway actually led prices higher.
This month, funds turned the most bullish since the early weeks of Russia’s war in Ukraine, 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.
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. A reduction in flows from Norway, Europe’s top gas supplier, is adding to supply risks due to an extension of works at the giant Troll field.
Still, European gas prices are far below the highs of last year’s energy crisis. The region’s storage facilities are at record levels for the season, providing some cushion ahead of the upcoming heating season.
Dutch front-month futures, Europe’s gas benchmark, fell 12% to €37.70 a megawatt-hour by 12:49 p.m. in Amsterdam.
–With assistance from Anna Shiryaevskaya and Elena Mazneva.
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