European Gas Jumps as Lingering Supply Risks Keep Market on Edge

(Bloomberg) -- European natural gas rebounded on Friday, trimming this month’s first weekly drop, with traders weighing further labor talks in Australia and heavy maintenance in Norway. 

Benchmark futures jumped as much as 11% after two days of sharp declines. While key Australian exporter Woodside Energy Group Ltd. moved closer to a final deal with workers, there’s still uncertainty about negotiations between Chevron Corp. and its staff. 

In addition, flows to Europe from top provider Norway slumped to the lowest in two months as capacity reductions deepened at the giant Troll field amid seasonal maintenance. The facility is set to halt supplies completely from Saturday to Sept. 7 — together with the major Kollsnes processing plant — and any extensions to works could push prices higher.

A more than 20% rise in gas prices this month — despite high stockpiles and subdued demand — reflects the jitters permeating through the market following the worst energy crisis in decades. Chevron’s facilities impacted by labor disputes cover about 5% of global liquefied natural gas capacity, and strike risks could mark a significant disruption.

“The European market is oversupplied until possible cold weather arrives,” said Jonathan Stern, distinguished research fellow at the Oxford Institute for Energy Studies. “But this kind of ‘rumor volatility’ seems likely to be with us for at least another year.”

European gas saw a “technical rebound” Friday as potential risks for Chevron’s plants still remain, analysts at Engie SA’s EnergyScan said in a note. Yet, the market nervousness seems to have eased somewhat after an in-principle agreement between Woodside and its workers, they said. The pact, endorsed by unions, should be finalized by the end of next week.

If full-scale walkouts in Australia had occurred, disruptions could have forced Asian buyers to compete with Europe for replacement cargoes from the US or Qatar. The region needs a continuous flow of LNG after losing most pipeline supplies from Russia last year.

Dutch front-month futures, Europe’s gas benchmark, traded  higher at € a megawatt-hour by 5:53 p.m. in Amsterdam. The UK equivalent contract was up . 

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