Europe’s benchmark natural gas prices slumped on Wednesday after settling on Tuesday at the highest level since April, amid market tensions over a labor dispute threatening LNG supply from Australia.
The front-month futures at the Dutch TTF hub, the benchmark for Europe’s gas trading, had plunged by 12% to $40.94 (37.86 euros) per megawatt (MWh) as of 11:29 a.m. GMT on Wednesday, as workers and LNG facility owners in Australia discuss a possible resolution to the dispute about pay and work conditions.
The contract rose by more than 5% on Tuesday, settling at the highest levels since April this year. The extreme volatility suggests that market participants are anxiously expecting any outcome of the talks between Woodside and trade unions over pay and work conditions.
Woodside Energy representatives are meeting on Wednesday with union representatives to discuss the issues over which workers had raised concerns.
Woodside said on Tuesday that it had “constructively addressed” the concerns of the employees.
On Sunday, the unions at Woodside’s North West Shelf offshore gas platforms said they could go on strike as early as September 2 if the workers’ bargaining claims for the Woodside Platforms are not resolved by Wednesday, August 23.
Woodside’s North West Shelf is the largest LNG production project in Australia, with a capacity of 16.9 million tons annually, followed by Chevron’s Gorgon, which has a capacity of 15.6 million tons. Wheatstone, also operated by Chevron, can produce 8.9 million tons of LNG annually. The three LNG sites threatened by industrial action account for 10% of global LNG supply.
“Natural gas markets should get more clarity around Australian LNG supply over the next 24 hours, given that end-of-day Wednesday is the deadline that workers at Woodside’s North West Shelf gave to come to a deal,” ING strategists Warren Patterson and Ewa Manthey said on Wednesday.
“As a result, we could see further volatility in natural gas prices for the remainder of the week.”
By Charles Kennedy for Oilprice.com
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