European natural gas prices fell Thursday after the dust settled from Wednesday’s rally over supply concerns tied to potential strikes at LNG terminals in Australia that are likely to keep the market more volatile until labor negotiations are resolved.

The prompt Title Transfer Facility (TTF) contract closed 7% lower to finish just shy of $12/MMBtu on Thursday, while the October contract gave up 6% to settle at $13.02. The slide came a day after the prompt contract surged by nearly 30% in a session that was partly influenced by short covering as traders bought back gas they had sold as prices moved against them. 

The market on Thursday was again left to weigh lackluster demand and storage inventories in Europe that are well above the five-year average at 88% of capacity. Any...