In recent months, the tranquil atmosphere of the natural gas markets in Asia and Europe has been disrupted by strike threats at three major Australian liquefied natural gas (LNG) plants. In the week of August 11, spot prices for LNG shipped to North Asia climbed to $11.50 per million British thermal units (mmBtu), a 5.5% increase from the previous week's $10.90, marking the highest price in a month.
The potential strike threat at LNG plants operated by Woodside Energy and Chevron in Western Australia has a more pronounced impact on Asia. Woodside's North West Shelf LNG plant, as well as Chevron-operated Gorgon and Wheatstone gas fields, are all under the threat of strikes.
The market was spooked by the looming strike action, resulting in a 28.3% increase in Europe's benchmark Dutch natural gas prices from the close on August 8 to the close on August 10. Although Woodside and Chevron are negotiating with the unions at the LNG facilities, it remains unclear what form any strike action might take. The mere suggestion of a supply threat, should an agreement not be reached, is enough to panic the market, reminding us that any tension could lead to significant fluctuations in LNG prices, as was seen after last year's price surge.
Japan, China, and South Korea are the largest importers of cryogenic fuel in Asia. The threat of strikes at Woodside and Chevron's gas fields comes at a time of seasonal demand increase for LNG in Asia. If the strikes in Australia's natural gas industry are not reasonably resolved, it will force these three countries to compete for spot LNG supplies elsewhere, further exacerbating the volatility in the natural gas market.
Data compiled by the commodities analysis firm Kpler shows that Asia's natural gas imports in July rose to 21.59 million tons, not only above June's 21.29 million tons but also the highest level since February. Kpler expects Asia's import volume in August to be 21.9 million tons, but this figure could be revised upwards as more accurate shipping data becomes available.
In contrast, due to higher natural gas reserves in Europe and a structural decline in demand for fossil fuels, LNG imports into Europe have been on a downward trend. Data indicates that Europe's natural gas imports in July are estimated at 8.77 million tons, the lowest level since August of last year. Kpler expects Europe's natural gas import volume in August to be 7.65 million tons, which could be the lowest since November 2021.
Furthermore, although concerns over energy triggered by the Russia-Ukraine conflict have eased, restraining natural gas price fluctuations and supply tension, any issues on the supply side, particularly in the context of peak seasonal demand in China, Japan, and South Korea, could cause drastic fluctuations in natural gas prices.
