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US Crude Oil, Natural Gas Rig Counts Diverged Week Ended April 10

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Why were rig counts lower last week?

Last week’s lower rig count was mainly due to there being 42 fewer active crude oil rigs, partially offset by the addition of three natural gas rig counts. One miscellaneous rig was idled last week. Read the next part of this series to see how the crude oil rig count declined.

In the last year, the total US crude oil and natural gas rig count has dropped by 843, or 46%. The number of active oil rigs decreased by 757, or 50%, and the number of natural gas rigs fell by 85, or ~27%. The total rig count increased by 60 for the corresponding period ending April 11, 2014.

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Rig count trends and the will to drill

Rig counts tell us how many rigs are actively drilling for oil and gas. Fewer rigs can be a good sign that supply and demand are nearing a balance. Rig counts also signal how confident producers are about the market for drilling for oil and gas.

Falling rig counts indicate a decline in upstream activity, which can result in falling production growth for the upstream operators. Hess Corporation (HES), Chesapeake Energy (CHK), Continental Resources (CLR), and Apache (APA) are upstream companies. Together, HES and CHK account for 2.1% of the Energy Select Sector SPDR ETF’s (XLE) total market capitalization. Apache comprises 1% of the iShares Global Energy ETF (IXC).

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