Natural Gas Price Fundamental Daily Forecast – Traders Bracing for Gap Higher Opening on Monday

U.S. natural gas futures posted a more than 4% loss on Friday, contributing the market’s worst week in two months. Although worries about rising production and slipping demand kept a lid on prices, most of the selling was attributed to a retreat in European prices ahead of a planned resumption of Russian gas flows via the Nord Stream 1 pipeline.

However, conditions changed late Friday following the announcement that the pipeline would not be opening on September 3 as scheduled.

On Friday, October natural gas futures settled at $8.786, down $0.476 or -5.14%. The United States Natural Gas Fund ETF (UNG) finished at $30.72, down $1.02 or -3.21%.

Europeans Eyeing Gasprom Flows

According to reports released throughout the session Russia had indicated that flows along the Gasprom pipeline system will be revived on Saturday. Traders said this news contributed to much of the weakness in both the United States and Europe.

Reuters said that Dutch and British wholesale gas prices fell to their lowest level since early August on indications that Nord Stream 1 flows will resume on Saturday, although analyst remained cautious.

Energy Information Administration Weekly Storage Report

The EIA reported on Thursday that domestic natural gas supplies rose by 61 Bcf for the week-ended August 26.

Total working gas stocks in storage stand at 2.640 trillion cubic feet, down 228 Bcf from a year ago and 338 Bcf below the five-year average, the government said.

The EIA reported a 21 Bcf injection for the year-earlier period, while the five-year average injection is 46 Bcf.

The data may be indicting that the U.S. shoulder season is underway, which could mean lower prices. However, the Gasprom issue throws a wrench into this assessment.

Short-Term Outlook

All eyes will be on the Gasprom pipeline over the weekend and early Monday after reports surfaced late Friday that Russia’s Gazprom again halted its key gas pipeline indefinitely, a move decried by European politicians as an attempt to use energy as a weapon.

According to Bloomberg, “Hours after the Group of Seven leaders agreed to implement a price cap on Russian oil, Gasprom reversed its plan to resume flows through the Nord Stream pipeline. It was meant to open again on Saturday after maintenance, but the company said a fault had been discovered.”

On paper this is potentially bullish news for U.S. natural gas because Europe is going to have to rely on the U.S. for supply. However, for weeks Europe has been building up its storage, in an attempt to prepare for the prospect of a Russian cutoff, and has a buffer for at least part of the winter. But the situation could get much worse when stockpiles decrease, especially closer to the end of the heating season – or if Europe has a severe cold snap.

If you believe that there can never be enough supply heading into heating season then yes, Gasprom is a big deal that could send prices soaring as countries scramble to refil storage facilities.