European Commission (EC) President Ursula von der Leyen reported that the European Union’s gas storage facilities had reached almost 90% of their capacity two months ahead of the set deadline. Spain, on the other hand, has reached an all-time high with its underground natural gas reserves, reaching almost 100% of its capacity. Still, gas prices in Europe continue to rise due to a labor dispute in Australia, which could disrupt liquefied natural gas (LNG) exports from that country. Workers at Chevron and Woodside Energy power plants are planning a strike in September that could disrupt about 10% of the world’s LNG supply. Australia is the second largest LNG exporting country in the world after Qatar.
Should these strikes continue, European LNG buyers would have to compete with Asian operators for alternatives to Australian gas. This could double European and Asian LNG contract prices by early 2024. Asian buyers are likely to increase their LNG imports to replace Australian volumes, directly impacting Europe. Although speculative movements in gas prices can be observed, the price increase indicates that risks to gas supplies in Europe remain.
With gas supplies in the region unusually high for this season, there is some certainty that Europe will be prepared for the winter months without major risks. However, price competition with Asia and seasonally higher demand could affect gas supplies in Europe next winter.