While the gas market seemed to have calmed down reasonably well last week, the price on the Dutch futures market TTF turned out to be highly flammable again this week. The current European gas market has become dependent on LNG supplies. As a result, possible strikes at four LNG terminals in Australia immediately make the gas market in the European Union nervous.
The gas price is still very volatile. On Wednesday, August 9, the gas price stood at €39,82. A day earlier, the gas price was still 28% lower. On Tuesday, August 8, the TTF was trading at €31,07. After the peak, the gas price fell sharply again. On Monday, August 14, the gas price had fallen again to €34,43. In the morning of Wednesday, October 16, the gas price rose sharply again to €42,01.
The volatility on the gas market proves once again how dependent Europe has become on the LNG market. The August 9 increase followed news that export capacity on the other side of the world could be disrupted. Rumors are swirling about strikes at four essential LNG terminals in Australia. Together, these terminals are responsible for supplying 10% of all liquid gas traded worldwide.
Although Australian gas is mainly sold on the Asian market, any strikes will affect prices on the world market. Higher Asian LNG prices make circumnavigation attractive for boats bound for Europe. According to analysts, this risk mainly exists for American LNG. This scenario seems to be slowly but surely becoming reality. On Monday, August 14, Australia's financial watchdog authorized strike action. The Asian LNG price rose 5,5% after the news. The fact that the European gas price reacts much more strongly to the disruption is a sign that the European gas market is still not very stable.
For a moment the storm seemed to subside, because the idea arose that the danger of strikes was not as urgent as expected. But on Tuesday, August 15, the atmosphere changed again after Reuters announced that negotiations between Chevron and Woodside Energy Group and the unions are unlikely to lead to results. According to Reuters, workers could go on strike at any time. After that, it will in principle take at least a week before the unions can stop work.
High filling level is not the solution
A fortunate coincidence is that European gas reserves are already almost full. On average, the European Union is already close to the desired filling rate of 90% in November. European reserves are currently 89% full. Several countries, including the Netherlands, already meet this target. The Dutch gas supply is currently 92% full. This is considerably more than the target of the Dutch Gas Union. That organization has a target of 74% for this time of year.
Last week, analysts seemed to agree that the high filling level is calming the gas market, but this sentiment now seems to have changed among many. Although there is no acute energy crisis, analysts appear to be placing more emphasis on the risks of a severe winter. In the event of prolonged extreme temperatures below freezing, even a one hundred percent filling level may prove insufficient to prevent shortages. Especially if Europe is not able to obtain sufficient LNG.