High natural gas prices to cool after Australian workers’ stoppage is resolved: Analysts

Uptick in prices due to the Australia issue is a short-term supply disruption-driven price surge

Natural gas prices, which have spiked recently due to fears of a workers’ union strike in Australia, are unlikely to sustain at high levels, said analysts.

European natural gas prices have gained around 10 percent in the last week while Asian spot liquefied natural gas (LNG) prices have also increased.

Prices have risen over supply concerns if the workers at Woodside Energy and Chevron in Australia, which accounts for about 10 percent of world LNG output, were to go ahead with their proposed walkout.

However, energy experts told Moneycontrol that the spike is temporary and prices would ease off once the situation in Australia settles.

“Uptick in prices due to the Australia issue is a short-term supply disruption-driven price surge but we are not expecting much of an increase going forward. Once the issue is resolved, prices will tend to moderate,” said Suman Chowdhury, chief economist and head of research, Acuite Ratings & Research.

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“China is one of the biggest energy consumers and the economic recovery in the country has been lower than expected. Also, people are not sure if interest rates in the US have peaked. So concerns of a slowdown and higher interest rates are going to upset demand for natural gas. Therefore, prices are unlikely to sustain at higher levels for a long period,” Chowdhury added.

Australia is one of the largest exporters of LNG (mainly to Asia) and concerns about a strike have spurred global volatility in prices.

“The market was mostly under pressure from reports of ample supplies in the US and forecasts for cooler US weather that will curb the gas demand from electricity providers to the power air conditioning units. Last week the LNG workers in Australia had voted to strike, which could tighten the global supplies. Expecting a similar situation for this week we expect the overall trend to be sideways,” domestic brokerage Religare said in a report.

The near-term indicators suggest a possible bounce-back action, but would appear to be short-lived, the report added.

India is dependent on imports of natural gas for around 50 percent of its requirements. The country’s cumulative LNG import in the current financial year till July was higher by 4.7 percent from last year at 9,982 million metric standard cubic metres.

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Globally, experts say gas prices would not sustain at high levels but factors such weather conditions and supply issues could result in higher prices.

“The European market is well supplied as of now and their storage levels are also above the five-year average. If the weather remains okay and renewable energy generation is as expected, then prices should settle down. But if these factors do not play out accordingly and the Australian strike goes through then prices may increase,” said Prashant Vasisht, vice president and co-head, corporate ratings, ICRA.

Australia does not supply natural gas directly to Europe but a threat to supplies from the country could result in market disruption.