Risks skewed to upside – ANZ

Gas market is shifting to a more balance position. However, economists at ANZ Bank note supply risks that could lead to further upside in prices.

Striking fear into Gas markets

Supply-side issues are once again back in focus in the global Gas market. Industrial action in Australia could threaten the relative peace the global Gas markets experienced following Russia’s invasion of Ukraine last year.

Workers at several Western Australian LNG facilities operated by Chevron and Woodside are threatening to strike over wages and conditions. Three major facilities there provide around 10% of global supply, and the impact on the market will be dictated by the length of any disruption. 

The impact will initially be felt in Asia. Most of the contracted supply finds its way to Japan, but China also receives a sizeable chunk. More significantly, the reduction in supply could ignite a bidding war between Europe and Asia.

This comes as the market shifts to a more balance position. Any disruption lasting more than a month is likely to have a material impact on the supply-demand balance over the northern winter, which would see a re-rating by the market, leading to further upside in prices.