European gas prices fall after Norway’s government steps in to end oil and gas strike

European gas prices on Wednesday fell away from four-month highs after Norway’s government intervened to bring an end to an oil and gas strike that threatened to exacerbate the region’s deepening energy crisis.

The front-month gas price at the Dutch TTF hub, a European benchmark for natural gas trading, was last seen trading 2.5% lower at 161 euros ($164.6) per megawatt-hour. The contract briefly climbed above 178 euros per megawatt-hour amid intensifying supply fears in the previous session, reaching its highest level since early March.

Norway’s government late on Tuesday proposed “compulsory wage arbitration” to effectively bring an end to the industrial action by offshore workers.

“The announced escalation has critical implications in the current situation, both in relation to the energy crisis and the geopolitical situation we’re facing with war in Europe,” Labor Minister Marte Mjos Persen said in a statement.

Under Norwegian legislation, the government can intervene in certain conditions to force parties in a labor dispute to a wage board that will decide on the matter.

“The parties themselves are generally responsible for finding a solution in such instances. But when the conflict could result in such far-reaching societal impacts for all of Europe, I have no other choice than to intervene in the conflict,” Persen said.

Offshore oil and gas workers walked out of their jobs on Tuesday. The Lederne trade union, which has more than 1,300 members, called the strike as the cost of inflation outpaced proposed revised salaries.

The stoppage resulted in the closure of three fields, and further strike action had been scheduled for both Wednesday and Saturday.

Norway’s government said that based on the announced strike numbers, it had been feared that more than half of the country’s daily gas exports would have been lost by the weekend.

The proposed wage board to resolve the dispute between the Lederne trade union and Norway’s Oil and Gas Association now means both parties have agreed to end the strike.

It comes as European governments scramble to fill underground storage with natural gas supplies in an effort to provide households with enough fuel to keep the lights on and homes warm during winter.

The EU, which receives roughly 40% of its gas via Russian pipelines, is trying to rapidly reduce its reliance on Russian hydrocarbons in response to President Vladimir Putin’s months-long onslaught in Ukraine.

Russia’s state-backed energy giant Gazprom is poised to temporarily shut down the Nord Stream 1 pipeline — the European Union’s biggest piece of gas import infrastructure — for annual maintenance works from Monday. The closure has stoked fears of further disruption to supplies.

Lu Ming Pang, analyst at Oslo-based Rystad Energy, said that had the situation not been resolved, natural gas prices in Europe would have been sent back to — or even exceeded — their all-time high of 227 euros per megawatt-hour reached in March.

“An averted strike in Norway, and potentially reduced Russian gas volumes as the Nord Stream 1 shuts down due to annual maintenance starting 11 July, should further emphasize the importance of the EU being less dependent on gas and energy imports,” Rystad’s Lu Ming Pang said.

“Given the swift and timely response by the Norwegian government, the message is clear that there should not be any doubts on the security of Norwegian gas supplies, and that now more than ever, the EU and allies must stay united to avert any future challenges that may come their way.”