Weekly Market Update - European natural gas prices surge amidst Australian LNG strike threat

Sales Trader, Jean-Philippe Marty, reports on energy market activity, covering the period 22nd – 25th August 2023. On our end-of-day pricing tool, The Source, we published an in-week high of £ 136.43/MWh for the Winter-23 seasonal power price on 22nd August. In this blog, Jean-Philippe shares the market news and updates from the last week.

European natural gas prices surged once more, reaching a two-month peak on Wednesday as a result of the potential strike action at an Australian LNG production facility. On Tuesday, the UK gas system started with a deficit, as Isle of Grain and South Hook nominations held steady compared to the previous day. UK electricity prices also rose, driven by strong performances in the gas and carbon markets. Among the contracts, the September-23 contract was the most actively traded, with 422MW exchanged.

Woodside Energy, an Australian petroleum company, was meant to have a meeting with the union last Wednesday. After uncertain results last week, the half-year report is now available. Another company, Chevron, is lined up to meet with unions this week. Chevron aims to offer improved compensation and terms to Gorgon and Wheatstone plant employees to avoid strikes. While gas prices have dipped, they remain higher than early August levels. UK power curve experienced limited trading due to gas market instability. The September-23 NBP price briefly fell by 16ppth at one juncture, swiftly recovering, illustrating ongoing market unease.

On the second consecutive day of significant adjustment, the NBP Winter-23 contract commenced 10ppth below its previous position, and the TTF counterpart initiated €5/MWh lower. While wage discussions persist, an overwhelming 99% of Chevron's LNG employees have cast affirmative votes for potential strikes. Correspondingly, UK power experienced a notable decline driven by gas fluctuations, aggravated by corrections in both the EU and UK carbon markets.

Friday morning was relatively calm, with the gas market stabilising following a two-day decline. The probability of strikes at the Wheatstone and Gorgon LNG plants is growing, causing prices to rise. Employees at these facilities have granted unions the authority to initiate a strike. Additional maintenance at Norwegian gas fields is set to commence in the upcoming week. On Friday the UK power curve lacked substantial activity, with trading beyond Winter-24 amounting to less than 20MW.