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Natural Gas Rig Count and Natural Gas Prices Diverge

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US natural gas rig count 

The US December natural gas futures fell by 11% in the last three weeks. Over the same period, the natural gas rig count rose by eight for the week ending October 30, 2015. Baker Hughes (BHI) will publish the weekly natural gas rig count report on November 6, 2015. The US active natural gas rig count rose for the third straight week.

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Impact 

The EIA (U.S. Energy Information Administration) released its monthly Drilling Productivity Report on October 13, 2015. The data showcased that the natural gas production could slow down in November 2015 by 294 million cubic feet per day. The fall in the production would be led by the Marcellus and Eagle Ford shale regions. It signifies that the natural gas rig count could fall. Natural gas prices also fell by 10% in the last three weeks.

The US natural gas drilling activity fell by 43% from 346 in 2014 to 197 in 2015 due to the mammoth fall in natural gas prices. Prices fell 30% in the past year due oversupply concerns. However, the EIA estimates that the natural gas production will rise over the long term due to improving productivity and lower drilling costs. This would push oil producers to increase the drilling activity. A rise in the drilling activity benefits oil drillers like Schlumberger (SLB), Noble Energy (NE), Baker Hughes, and Halliburton (HAL).

ETFs like the PowerShares DB Energy ETF (DBE) and the PowerShares DWA Energy Momentum ETF (PXI) are also impacted by the roller coaster ride of oil and gas prices.

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