Australian Strike Risk Pushing Gas Prices Higher, Inflation Risk

Supply risks are now impacting not just oil prices but also gas prices, especially the European traded contracts. Higher oil and gas prices pose a risk to the inflation outlook at a time when central banks are looking to pause their tightening cycles.

• LNG prices in Europe have been rising since late June but were sharply higher on Wednesday rising 27.8% driven by strike fears at Australia’s Chevron and Woodside operations. They rose to a high of EUR43.55/mwh before closing just below EUR40. It was the largest gain since March 2022. North Asian prices only rose 0.7% but may follow given the upcoming winter.
• Talks are ongoing to avoid industrial action re pay and conditions but contingency plans exist if it goes ahead. 99% of workers at Woodside’s offshore plant have voted to strike, according to the union.
• Prices had already been under pressure from increased aggression between the Ukraine and Russia. The war there has made Europe more dependent on imports outside the region, including from Australia’s North West Shelf.
• Goldman Sachs has said that if Australian workers strike, it will impact around 10% of the world’s LNG supply. It is estimating that prices could rise to EUR68-97/mwh for winter 2024 depending on temperatures if the strike goes ahead and is prolonged. It would also result in more oil being consumed which would drive crude prices higher too.