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Crude Oil Prices Could Pressure US Natural Gas Prices in 2018

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Jan. 2 2018, Updated 11:30 a.m. ET

US natural gas rigs 

Baker Hughes, a GE company, released its US natural gas rig count report on December 29, 2017. It reported that natural gas rigs fell by two or 1.1% to 182 on December 22–29, 2017. However, US natural gas rigs rose by 47 or 35% in 2017. Natural gas rigs rose as US crude oil (USO) (UWT) prices were trading near multiyear highs.

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Natural gas rig count 

US natural gas rigs rose 37.9% in the last 12 months. However, US natural gas prices (UGAZ) fell almost 21% during this period. US crude oil prices rose 12.3% during the same period.

Energy companies (XES) (XOP) increased their spending plans for 2017 as crude oil prices recovered to multiyear highs. Higher oil (UCO) and natural gas (DGAZ) prices would increase the US drilling activity. It favors energy producers and drillers like EQT (EQT), Rowan Companies (RDC), Diamond Offshore (DO), and Newfield Exploration (NFX).

Financial services company Cowen expects that exploration and production companies in the US will increase their capital expenditure for 2018. Higher capital expenditure in 2018 would increase the US drilling activity. Higher oil prices in 2018 could be the reason for higher capital spending.

Crude oil prices and natural gas prices  

US natural gas rigs were near a ten-week high, while US oil (DBO) prices were near a 30-month high. Natural gas is usually an associated product of crude oil. Higher oil prices would increase the US crude oil rig count, which would also drive natural gas supplies. Higher US natural gas supplies would pressure natural gas (UGAZ) (UNG) prices.

Next, we’ll discuss US natural gas production and consumption.

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