Natural Gas Price Fundamental Daily Forecast – Russia Begins Supply Squeeze on Europe

Natural gas futures are trading at a two-week low on Wednesday as U.S. traders take their cues from volatile European energy markets. Sellers appear to be gunning for support as they try to put a bearish spin on the market ahead of the new month. This is important price activity because it will give the market an indication of buying interest this late in the summer cooling season.

Helping to drive the selling pressure are reports of strong production levels and weaker export volumes amid the deferred restart of the Freeport LNG terminal to November, according to NatGasWeather.

At 13:37 GMT, October natural gas futures are trading $8.843, down $0.199 or -2.20%. The United States Natural Gas Fund ETF (UNG) is at $30.62, down $0.78 or -2.48%.

Europe Storage Bins Filling Fast, Government’s Talking Price Caps

Traders are anticipating heightened volatility over the short-run due to the wicked price action in Europe. NatGasWeather said that the greater-than-normal price swings particularly at the Dutch Title Transfer Facility are carrying over to the U.S. markets. Prices reached all-time highs last Friday at the DTTF, only to plummet on Monday and Tuesday.

NatGasWeather attributed the pullback in European prices to a combination of “supplies refilling faster than expected” and “policy makers looking to cap energy prices.”

Russia Begins Squeeze on Europe

Russia halted gas supplies via Europe’s key supply route on Wednesday, intensifying an economic battle between Moscow and Brussels and raising the prospects of recession and energy rationing in some of the region’s richest countries.

This news has been priced in for days. Russia’s plan is to shut down the Gasprom pipeline to Germany from August 31 to September 3. At least that’s what their saying. The biggest fear for market participants at this time is “what happens on September 3?” What if Russia delays the reopening of the pipeline? This is the major issue that could cause prices to skyrocket early next week.

Daily Forecast

Technically speaking, the main trend changed to down on the daily chart early Wednesday with the selling pressure stopping just above a short-term support area at $8.762 to $8.472.

Today’s downside momentum suggests sellers are going to try to probe the support zone in an effort to see if there is any buying interest. That being said, we could see a technical bounce on the first test of $8.762 to $8.472. However, we’re not going to be completely convinced that the rally is still strong unless the buying is strong enough to take out $9.987.

On the other hand, a drive through $8.472 will be a sign of weakness. If enough selling volume comes in on this move then we could see an acceleration to the downside with $7.669 to $7.121 the next major target.