How the Oil Rig Count Affects Natural Gas Prices



The natural gas rig count

In the week ended September 29, 2017, the natural gas rig count fell by one to 189. On a year-over-year basis, the natural gas rig count has risen ~97%. However, on October 4, 2017, natural gas (GASL) (GASX) prices fell 0.8% on a year-over-year basis. This trend indicates that drilling activity has increased despite no price bullishness.

This increased drilling activity could lead to higher production. This activity not only pressured prices as rigs rose in the past, but it could also pressure prices going forward.

The oil rig count

Since 2008, the natural gas rig count has fallen 88.2% from its record high of 1,606. However, natural gas supplies rose during this period. Natural gas is often produced during crude oil’s extraction.

During the week ended September 29, the oil rig count rose by six to 750. However, due to oil prices and the oil rig count pattern, the oil rig count could fall on a short-term basis. This movement could benefit natural gas bulls.

The new-well gas production per rig could fall by 3,000 cubic feet per day in October 2017 on a month-over-month basis. This development could bring support for natural gas prices and help natural gas–weighted stocks such as Cabot Oil & Gas (COG), Rice Energy (RICE), and Chesapeake Energy (CHK).

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