Natural gas prices are likely to decline further today after Woodside Energy reached an in-principle agreement with a trade union that should significantly reduce the risk of industrial action at the largest LNG production facility in Australia.
That’s according to ING’s Warren Patterson and Ewa Manthey, who wrote in a note today that natural gas prices in Europe had already shed 14% on Wednesday on the prospect of an agreement between Woodside and its workers. The danger of another price spike, however, is not over yet as negotiations between Chevron and trade unions continue.
Earlier this month, gas prices in Europe soared by 40% on the news that workers at three LNG facilities in Australia were planning industrial action. Such action would disrupt about a tenth of global LNG supply. The North West Shelf, operated by Woodside, is the largest LNG production project in Australia, with a capacity of 16.9 million tons annually, followed by Gorgon, which has a capacity of 15.6 million tons Wheatstone can produce 8.9 million tons of LNG annually.
Negotiations began immediately and it appears to have produced results that will help avoid another gas price shock for Europe even as its gas storage has reached its fill-up target of 90% three months ahead of the deadline. The strike risk highlighted the precarious balance of the global LNG market after demand spiked last year with Russian pipeline gas flows getting decimated amid the war in Ukraine.
This has made large LNG suppliers such as Australia all the more important, with any news suggesting supply disruptions having a significant impact on prices. Meanwhile, Reuters reports that Woodside’s workers now have to ratify the in-principle deal but it looks like that particular strike has been averted. This is good news for LNG buyers because even if Chevron fails to reach a deal with its workers, the impact of a strike will be smaller when it doesn’t involve the massive North West Shelf facility.
Source: Oil Price