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US Natural Gas Rig Count Falls by Eight

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Natural gas rig count

Baker Hughes (BHI) published its weekly natural gas rig count report on November 25, 2015. The oil equipment company reported that the natural gas rig count fell by four to 189 for the week ended November 25, 2015, which is the fifth fall in the last ten weeks. The natural gas rig count has fallen by eight in November 2015.

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Why did the natural gas rig count fall? 

The natural gas rig count fell due to a fall in natural gas prices. Natural gas prices fell due to record natural gas production. Natural gas production rose due to technological advancement and lower drilling costs. This has led to an oversupply and natural gas prices falling more than 30% in the last one year. The fall in natural gas prices has impacted drilling activity. The natural gas rig count fell from 344 in 2014 to the current level of 189 rigs. US drilling activity has fallen more than 45% in the last one year.

Impact

Reduced drilling activity impacts drillers such as Baker Hughes, Schlumberger (SLB), Superior Energy Services (SPN), and Halliburton (HAL). These stocks account for 35% of the iShares US Oil Equipment & Services ETF (IEZ). The long-term downward trend of natural gas prices suggests that drilling activity could fall further. Increasing production will continue to weigh on natural gas prices. Uncertainty in the energy market affects ETFs such as the PowerShares DB Energy ETF (DBE) and the PowerShares DWA Energy Momentum ETF (PXI).

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