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Will the Natural Gas Rig Count Fall for the Fourth Week?

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Oct. 21 2015, Updated 1:06 p.m. ET

Natural gas rig count falls again 

On October 16, 2015, Baker Hughes (BHI) will release its active US natural gas rig count. Baker Hughes reported that the US natural gas rig count fell by six to 189 for the week ending October 9, 2015. Similarly, the US natural gas rig count fell by two to 195 for the week ending October 2, 2015. The US active natural gas rig count fell for the third consecutive week for the week ending October 9, 2015.

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Why did the natural gas rig count fall?

Technological advancement led to the rise in natural gas production. The rise in production led to oversupply in the market. The rise in supply led to the fall in natural gas prices. Prices fell more than 35% in the past year. The fall in natural gas prices caused the drilling activity to fall by 40% in the past year. US natural gas rigs were at 320 in 2014. The lower drilling activity impacts oil and gas drillers like Schlumberger (SLB), Noble (NE), and Halliburton (HAL). ETFs like the PowerShares DB Energy ETF (DBE) and the iShares U.S. Oil Equipment & Services ETF (IEZ) are also impacted by falling oil and gas prices.

The total crude oil and natural gas rig count fell by 14 to 795 for the week ending October 9, 2015. The current oil and gas rig count is 1,135 less than 1,930 in 2014. The oil and gas rigs fell due to the fall in oil and gas prices. The prices fell due to oversupply concerns. The bearish natural gas price momentum and natural gas rig trend suggest that natural gas rigs could fall or slow down.

In its monthly drilling report, the EIA (U.S. Energy Information Administration) suggests that US natural gas production could fall in the key shale regions by 294 million cubic feet per day in November 2015. The Marcellus and Eagle Ford shale regions contributed to the falling production. This suggests that the drilling activity could slow down more.

In the final part of this series, we’ll look at natural gas prices’ trend in the last three months.

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