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US Natural Gas Rig Count and Prices Diverge

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Natural gas rig count 

Every Friday, Baker Hughes (BHI) releases its active weekly natural gas rig count report. The report is scheduled to release on December 4, 2015. Last week, the data showcased that the US active weekly natural gas rig count fell by four to 189 for the week ending November 27, 2015. The US natural gas rig count fell by eight in November 2015. In contrast, US natural gas prices were almost flat in November 2015.

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Total oil and gas rig count 

The total oil and gas rig count fell by 13 to 744 for the week ending November 27, 2015. This is 1,173 less than the rigs in 2014. The oil and gas rigs fell due to lower oil and gas prices. Oil and gas prices fell due to oversupply concerns. The US natural gas rig counts fell by 45% from 344 in 2014. During the same period, US natural gas prices fell more than 30%.

Impact

The bearish momentum of the natural gas prices and rig counts suggests that the natural gas drilling activity could slow down in the near term. The slowing drilling activity impacts oil and gas drillers like 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). In its monthly drilling report, the EIA (U.S. Energy Information Administration) projected that the natural production could slow down in December compared to November.

ETFs like the PowerShares DB Energy ETF (DBE) and the PowerShares DWA Energy Momentum ETF (PXI) are also impacted by the ups and downs in the oil and gas market.

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