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US Natural Gas Rig Count Follows the Natural Gas Price Trend


Dec. 22 2015, Updated 9:06 a.m. ET

US natural gas rig count

US natural gas prices have fallen 18% so far in December 2015. Likewise, the US natural gas rig count has fallen by 21 rigs so far in 2015. Baker Hughes (BHI) published its weekly US natural gas rig count report on December 18, 2015.

BHI reported that the US natural gas rig count fell by 17 to 168 for the week ending December 18, 2015, compared with the previous week. The US natural gas rig count fell for the fifth time in the last ten weeks.

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Why natural gas drilling is falling

US drilling activity has fallen by 50% since December 2014. The fall in drilling activity is mainly a result of the fall in natural gas prices. Natural gas prices have fallen more than 40% in the last year due to record natural gas production. The fall in drilling activity affects the performance of oil drillers such as Baker Hughes, Schlumberger (SLB), and Halliburton (HAL).

Record production and record natural gas inventories will continue to put pressure on natural gas prices for the week ahead. For this reason, natural gas prices could trade lower. Lower natural gas prices will affect drilling activity. In other words, the natural gas price trend and the natural gas rig trend could mirror each other.

In its monthly drilling report, the EIA (U.S. Energy Information Administration) estimates that US natural gas production could fall in January 2016. It suggests that US producers are less optimistic about higher natural gas prices.

ETFs such as the Guggenheim S&P 500 Equal Weight Energy ETF (RYE) and the PowerShares DB Energy ETF (DBE) are also affected by the ups and downs in the natural gas market.


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