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Natural Gas Traders Can’t Ignore Rising Rigs

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Aug. 17 2017, Published 12:23 p.m. ET

Natural gas rig count

The natural gas rig count fell by eight to 181 for the week ending August 11, 2017. On a YoY (year-over-year) basis, the natural gas rig count has more than doubled. However, natural gas active futures have only risen 10.4% during this period.

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Oil rig and natural gas supplies

Based on the latest data, the natural gas rig count has fallen 88.7% from its record high in 2008. However, natural gas supplies rose despite such a large fall in the natural gas rig count. The rise in the oil rig count could be behind the rise in natural gas supplies. Natural gas is often an outcome during crude oil extraction.

The oil rig count rose by three to 768 for the week ending August 11, 2017. In the past year, the oil rig count has almost doubled. The recovery in oil prices since November 30, 2016—the day that OPEC announced its production cut deal—has encouraged US oil producers (XLE) to add more oil rigs. Apart from the above factors, the new well gas production per rig could rise 25% in September 2017 on a YoY basis.

The above analysis could be crucial for natural gas (FCG) (BOIL) prices as well as natural gas–weighted stocks such as Southwestern Energy (SWN), and Antero Resources (AR). In the next part, we’ll discuss the natural gas inventory level.

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