Australian production disruptions will support the price of natural gas

11 September 2023 184
Australian production disruptions will support the price of natural gas

Natural gas prices have remained in a sideways range since mid-May. Despite the strikes at two Chevron facilities, the gas prices declined to the lower boundary of the rectangle.

 

The company no longer expects to reach a deal with unions and intends to ask the Fair Work Commission (FWC) to intervene.

On Friday, hundreds of employees at the Gorgon and Wheatstone liquefied natural gas (LNG) facilities began short-term strikes as 5 days of negotiations ended inconclusively. 

Meanwhile, the unions plan to begin a full-scale strike as early as Thursday, so it is unlikely the umpire will have time to hear arguments and decide beforehand. A first hearing is scheduled for Tuesday in Melbourne. It will handle only administrative questions.

The strikes lead to lower gas production and a supply shortage.

 

Demand for natural gas will increase because of the need to meet climate targets. The gas price may increase in the long term.

According to Baker Hughes Chairman and CEO Lorenzo Simonelli, natural gas will continue to play a critical role as a bridging for the energy transition.

Several factors have been identified as contributing to demand for this energy source. The first factor is the growing demand for LNG from Asia. It is projected to double by 2050.

The second factor is the ability of industry leaders to present gas as a good alternative to coal. Combustion of this fuel in Asian countries remains at a high level. The point when gas reaches a higher price than coal, but is cheaper than renewable energy sources. The gas price will have to try to achieve a high enough level to disincentivise coal, but not too high to make renewables competitive with LNG.

The third factor is the large-scale deployment of carbon capture and storage technology. For this, the authorities need to offer a large number of subsidies or introduce a carbon tax.

 

According to the technical analysis, the price of natural gas has fallen to the lower boundary of a flat. The current news background favors the continuation of this trend and a rise to the upper boundary of the rectangle.

The price increase target will be the level of $2.8. The gas price has rebounded from this level several times. A Stop-loss should be placed at the breakout of the lower boundary of the trend, which corresponds to the price of $2.45.

 

Growth of the natural gas price:

Take profit — 2.80

Stop-loss — 2.45

This content is for informational purposes only and is not intended to be investing advice.

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