Gas Market Prices – 18 October 2019

Key gas observations for the month ending 18 October 2019:

Following on from the disruption caused by the two drone bombings of the Saudi Arabia installations in the middle of September there was a short rally seen across Australia’s domestic markets. This is due to the strike hitting the facilities which process the majority of the countries crude oil output. With many long-term gas contracts being oil indexed and oil prices seeing their biggest jump in 30 years following the attack, this fed through into both longer term and short term gas prices domestically. However, with reassurances that supply would be restored within the month, and this being delivered early, the price quickly recovered. As such the rally was very short lived and more domestic fundamentals resumed their position as the main drivers on the markets over this period.

The ACCC netback price at the Wallumbilla Hub rose as expected in October to $5.19/GJ with futures following these gains. November’s futures price is currently showing a further increase to $6.58/GJ. These are still significantly lower than historic netback prices, due to LNG spot prices trading worldwide at the lowest levels recorded, caused by oversupply, and reducing Asian demand. Thus, LNG producers are starting to look domestically for contracts rather than on the international spot market. This has come through recently in a major deal between APLNG and Origin and the Santos deal which was declared in their quarterly reports, between them securing over 100PJ of gas domestically.

Sydney STTM prices were most affected by the news of the drone attack with the ex-ante prices jumping over $1.4/GJ over the two days following. This started to recover a few days later with September closing at $8.41/GJ. However, by mid-October this price started to raise back up to the $10/GJ level, mainly driven by cooler days and overnights driving demand up.

Average Brisbane STTM prices have been reasonably stable in compassion to the previous report, with a slight upwards trend in price towards the end of September, with Ex-Ante prices remaining between $6/GJ and $8/GJ for most of the period. However, the colder weather, storms and overnight lows dropping towards the end of last week (10th – 12th October) led to a significant increase in demand which pushed the price up towards the $9.50/GJ mark.

Average gas price remains in the mid range of $7 – $10/GJ in the Southern Markets of VIC DWGM, and Adelaide. But both are showing signs of picking up towards the end of the period following a similar trajectory to the Sydney STTM price due to similar cooler weather events.


Brisbane


Sydney


Victoria


Adelaide

Source: AEMO / ASX Energy