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Will Falling US Natural Gas Rig Counts Slow Down Production?

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US natural gas rig count falls again

Baker Hughes released its weekly natural gas rig count report on September 25, 2015. The natural gas rig count fell by one to 197 for the week ending September 25, 2015. In contrast, the natural gas rig count rose by two to 198 for the week ending September 18, 2015. The natural gas rig count fell for the sixth time in the last ten weeks.

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Impact  

The total oil and gas rig count fell by four to 838 for the week ending September 25, 2015. Likewise, the crude oil and gas rig count fell by six to 842 for the week ending September 18, 2015. Currently, the total oil and gas count is 1,093 lower than the level of 1,931 in 2014. The natural gas and crude oil rig count fell due to lower drilling activity. The lower drilling activity was due to lower oil and gas prices.

Currently, the gas rig count is 41.70% lower than the level of 338 last year. Falling natural gas rigs suggest that producers are less confident of higher natural gas prices due to oversupply concerns and lower natural gas prices. However, improving drilling efficiency and lower drilling cost could continue to increase productivity and supply in the market. It would put pressure on natural gas prices and producers.

In contrast, increasing drilling activity will keep oil drillers like Superior (SPN), Schlumberger (SLB), and Halliburton (HAL) busy. ETFs like the Energy Select Sector SPDR ETF (XLE) and the SPDR Oil and Gas ETF (XOP) will also be impacted by the volatility in the market.

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