European natural gas prices declined as Chevron Corp. and labor unions in Australia agreed to end strikes at major export plants, which roiled the market for more than a month.
Unions have advised the company that industrial action at liquefied natural gas facilities has been suspended, Chevron said in a statement Friday. The supplier “continued to meet all our commitments to domestic and international customers during this time,” it added.
Benchmark futures in Europe dropped as much as 6.1% before paring the loss.
In another boost to supplies, Norway — Europe’s biggest exporter — continues to ramp up production after protracted outages, with flows increasing again Friday. That’s helping to ease some nerves after weeks of intense volatility.
“Between the strike settlement and Norway ramping back up, a vast amount of gas supply is back in the mix that was uncertain a week ago,” said Ira Joseph, a global fellow at the Center on Global Energy Policy at Columbia University. “Don’t forget we are still at one of the weakest moments of the year for seasonal demand.”
The region almost never imports LNG from Australia, but prolonged industrial action could have caused disruptions at the Chevron plants, tightening the global market for the super-chilled fuel.
In Europe, winter inventories are higher than normal, but the market is still extremely sensitive. Numerous risks — including outages in the US, inclement weather, or potential disruptions to the little gas Russia is still exporting by pipelines — could impact prices.
Some Norway works will continue well into October. In addition, traders are monitoring LNG shipments from the US, following a drop in flows to the country’s biggest liquefaction terminal this week. They’re also watching whether Russia’s ban on diesel and gasoline exports has a broader impact on energy markets.
Tight Spot Market
Recent short-term risks created a pattern this month where day-ahead prices at times traded higher than futures for October. Some European traders even used gas from storage to fill in the supply gaps — not an unheard-of practice, but an anomaly when there’s no heating demand yet.
“This reflects traders with capacity at short-churn storage sites selling gas into a tighter spot market and betting on a prompt price disconnect in October,” analysts at Energy Aspects Ltd. said in a note. The “capacity will be refilled and the net impact on storage fill will be minimal.”
Some industry watchers even expect a temporary supply glut in Europe if there’s a mild start to winter — meaning October spot price could drop.
Dutch front-month futures, the European benchmark, fell 2.1% to €38.28 a megawatt-hour by 9:42 a.m. in Amsterdam. The contract is still on course for a weekly increase, following risks in recent days. The UK equivalent declined 2.2% on Friday.
--With assistance from David Stringer.
