Moderate Price Response To Australian Strike Action, Markets Edgy

European gas prices rose 5.5% on Friday to EUR 34.56 but even the high of EUR 36.90 didn’t come close to the EUR 40 level. Prices were also down 3% on the week despite the onset of industrial action at Chevron’s Gorgon and Wheatstone facilities in Australia which are worth around 6% of global output. Sluggish industrial demand and high European storage rates are keeping a lid on prices in the face of uncertainties around Australian LNG exports. North Asian prices have been steady.

• Talks between Chevron and unions broke down on Friday and resulted in the immediate walk out of about 500 workers for one to three hours. The period is to be extended through this week to up to 10 hours/day and then to 24 hours from September 14 for two weeks. According to The Australian, the dispute is not only over pay but also training, travel, job security, rosters and transfers to other sites. On Monday Chevron is expected to request the Fair Work Commission to intervene in the dispute.
• Most of Australia’s LNG exports go to Asia but if they seek alternative sources due to a prolonged strike then that will put pressure on supplies to Europe. Unions have promised to maintain domestic supplies but Western Australia is watching developments closely.
• Shell said at last week’s energy conference in Singapore that it would try and “mitigate any supply issues in Australia” but warned that the market is too complacent given how tight it currently is.