Key gas observations for the month ending 15 September 2019:
Prices across all domestic gas markets has been relatively flat and stagnant for the last month.
Average gas price remains in the higher range of $8 – $9/GJ in the Southern Markets of VIC DWGM, and Adelaide and Sydney STTM’s.
Average price for Brisbane STTM has been the outlier, swinging between $5 – $7/GJ.
Gas-fired generation has been heavily relied on in NSW, VIC and SA over the last month to cover the shortfalls in baseload coal units who have been struggling with reliability issues.
The ACCC netback price at the Wallumbilla Hub as of August was AUD$5.10/GJ and dropped further in September to AUD$4.78/GJ with gas over the last month not required in QLD for generation or heating purposes. Forward prices currently in October are forecasted to increase to AUD$5.19/GJ.
Big talking point for the gas industry in Australia is the impact to price that is likely due to the recent bombing of Saudi Arabian oil infrastructure on the 13/14 September. Saudi Aramco (owner and operator of the infrastructure) confirmed that 5 million barrels of oil production a day would be lost which amounts to 5-6% of global oil supply. This news sent shockwaves and spiked the brent crude oil price from USD$60/barrel to USD$69/barrel after the market opened on Monday (US Time). This has huge knock-on impacts on the domestic and international gas markets with multiple long-term gas supply agreements both domestically and internationally tied/linked to the price of brent crude oil. It is entirely possible we see greater volume available in the domestic gas markets with long-term international buyers looking to scale back their long-term GSA volumes opting for spot contracts instead (buying spot cargoes of LNG rather than taking delivery of long-term, oil linked GSA volumes). Another potential impact is that domestic gas prices in the local markets increase off the back of a stronger priced international market and long-term oil linked contracts which see domestic long-term buyers, paying more for their deliveries and on-selling volume at a higher premium.