US natural gas rigs
Baker Hughes, a General Electric (GE) company, will release its weekly US natural gas rig count report on February 16, 2018. In the previous week’s report, US natural gas rigs rose by three to 184 on February 2–9, 2018. Rigs increased 1.7% week-over-week and by 35 or 23.5% year-over-year.
Rigs increased because US crude oil and natural gas prices have increased ~131% and ~30%, respectively, since February 11, 2016. The Vanguard Energy ETF (VDE) and the Guggenheim S&P Equal Weight Energy ETF (RYE) rose ~26% and ~37%, respectively, during the same period. These ETFs have exposure to oil and gas companies.
Monthly drilling productivity report
The EIA released its monthly drilling productivity report on February 12, 2018. The EIA estimated that US natural gas production would increase in the seven shale regions by 832 Mcf (million cubic feet) per day to 64,941 Mcf per day in March 2018—compared to February 2018. Production is estimated to rise mainly in the Appalachia, Permian, and Haynesville shale regions during February 2018.
OPEC’s production cuts
OPEC and Russia agreed to supply cuts from January 2017 to December 2018. Saudi Arabia signaled the extension of the production cuts in 2019. US oil prices have risen more than 40% since June 21, 2017, partly due to the supply cuts. The Energy Select Sector SPDR ETF (XLE) has risen ~7% during the same period.
Higher compliance with production cuts and another output cut extension could support oil prices. Higher compliance could increase US energy companies’ capital expenditure and spur US drilling and production.
Crude oil prices
US crude oil prices rose ~12.4% in 2017, while United States Oil Fund (USO) rose ~3% during the same period. Natural gas is usually an associated product of crude oil. Higher oil prices would increase US oil rigs, which would increase US natural gas production. Higher US natural gas supplies would pressure natural gas prices.
Next, we’ll discuss US natural gas supply.