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Rig Count: A Look at Natural Gas’s Upside

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Oil rigs

In the week ended September 15, 2017, the natural gas rig count fell by one to 186. Also, the natural gas rig count has stalled between 180 and 190 since May 19, 2017. However, between May 19 and September 20, 2017, natural gas (BOIL) active futures fell 5%.

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The oil rig count

Since 2008, the natural gas rig count has fallen 88.4%, but natural gas supplies have risen significantly. The continuous rise in the oil rig count could be behind this trend. Often, natural gas is a byproduct resulting from oil’s extraction.

In the week ended September 15, 2017, the oil rig count decreased by seven to 749. Moreover, the oil rig count may not advance further based on the relationship between oil (UCO) (OIIL) prices and the oil rig count.

According to the EIA, the new-well gas production per rig could fall by 3,000 cubic feet per day in October 2017, compared to the previous month. In September 2017, it may contract by 23,000 cubic feet per day on a month-over-month basis. 

The fall in the natural gas rig efficiency could be a bullish catalyst for natural gas prices and therefore for gas-weighted stocks such as Southwestern Energy (SWN) and Range Resources (RRC) based on their correlations with natural gas prices.

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