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US Natural Gas Rig Count: More Concerns for the Bulls?

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US natural gas rig count  

On August 4, 2017, Baker Hughes (BHI) is scheduled to release its weekly US natural gas rig count report. In the previous report, the US natural gas rig count rose by six to 192 rigs on July 21–28, 2017. Rigs rose by 3.2% week-over-week and 123.3% year-over-year. The US natural gas rig count rose due to the rise in natural gas (UNG) (UGAZ) (DGAZ) prices in 2H16.

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Crude oil rig counts impact natural gas 

Natural gas is a by-product of crude oil. US crude oil rigs have risen by 392 or 105% YoY as of July 28, 2017. The rigs have also risen ~142% since the lows in May 2016. The US crude oil rig count rose due to the rise in crude oil prices in 2016.

The increase in US crude oil rigs will add to US natural gas supplies. Higher drilling activity benefits drillers like Transocean (RIG), Rowan Companies (RDC), Atwood Oceanics (ATW), and Diamond Offshore (DO).

Monthly international rig count

Baker Hughes’s international oil rig count excludes data from the US and Canada. It estimates that international oil rigs rose by three to 960 in June 2017—compared to the previous month. International oil rigs rose 0.3% month-over-month and 3.5% YoY.

Impact 

The EIA’s monthly Drilling Productivity Report suggests that natural gas production would rise in August 2017. The rise in US crude oil and natural gas rigs would drive natural gas production. President Trump’s energy plans could also drive natural gas production. It could weigh on natural gas (UNG) (FCG) prices.

In the next part, we’ll discuss US natural gas production.

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