Natural gas rig count
In the week ending September 1, 2017, the natural gas rig count rose by three to 183. On a year-over-year basis, the natural gas rig count has more than doubled. However, natural gas (FCG) (GASX) prices have only risen 10.4% during this period.
Oil rigs and natural gas supplies
The natural gas rig count has fallen 88.6% from its record level of 1,606 in 2008. Usually, fewer rigs translate into lower production. Since 2008, natural gas supplies have continued to rise. The reason could be the large rise in the oil rig count. Usually, during oil exploration in US shales, natural gas is also produced.
Last week, the oil rig count was unchanged at 759. From June 23, 2017, to date, the oil rig count has been between 750 and 770. The natural gas rig count has also consolidated between 180 and 190 since May 19, 2017. The consolidation in both the oil rig and natural gas rig count could be a bullish factor for natural gas prices.
Apart from the above dynamics, the new well gas production per rig could grow 25% in September—compared to the same period the previous year. More production could cap natural gas’s gains.
The above analysis is important for US natural gas producers (XLE) like Southwestern Energy (SWN) and Gulfport Energy (GPOR)—based on their correlations with natural gas prices in the short term. Natural gas prices can impact their profitability in the long term.