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Natural Gas Prices Rise despite the Fall in Natural Gas Rigs

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Updated

Natural gas rig count falls

Baker Hughes (BHI) released its weekly natural gas rig report on July 2, 2015. The data showed that natural gas rigs fell by nine to 219 active natural gas rigs for the week ending July 3. In contrast, gas rigs rose by five to 228 for the week ending June 26, 2015. The active natural gas rig count rose for the sixth time in the last ten weeks.

Total active oil and gas rigs rose by three to 862 for the week ending July 3. Last week, the total us rigs rose by two to 859 for the week ending June 26. Currently, the total rigs are 1,012 lower than the level of 1,874 in 2014. The massive fall in the rig count was due to lower crude oil prices. Oil prices fell more than 40% in 2014 due to oversupply concerns. This caused drilling activity to fall.

The recent rise in oil and gas rigs and the rise in crude oil prices could boost drilling activity. This could be positive for oilfield companies like Schlumberger (SLB), Baker Hughes (BHI), and Halliburton (HAL).

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The consensus of warmer weather and improving demand may continue to boost natural gas prices. This might slow down the natural gas rig count and promote more drilling. Yesterday’s rise in natural gas prices is positive for ETFs like the Energy Select Sector SPDR ETF (XLE) and the Spider Oil and Gas ETF (XOP). These ETFs moved in opposite directions yesterday. XLE rose slightly by 0.44% and XOP fell by 0.40%, respectively, at the close of trade on July 2.

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