Natural gas rig count
The natural gas rig count was at 193 last week—unchanged from the previous week. The natural gas rig count has fallen ~88% from its record level of 1,606 in 2008.
Oil rigs impact natural gas prices
Between January 2008 and December 2018, US natural gas’s marketed production rose ~66.9% despite the falling natural gas rig count. As a result of the increased supply, natural gas active futures have fallen 62.9% since January 2008.
Rising US oil production is the key factor behind the increase in natural gas supplies. Since natural gas is often a by-product of US shale oil production, it’s important to monitor the oil rig count to understand natural gas supplies.
Crude oil rig count
Between January 4, 2008, and March 15, 2018, the oil rig count more than doubled. Based on the relationship between oil prices and the oil rig count, the oil rig count is expected to keep rising until at least March. Last week, the oil rig count fell by one to 833—the lowest level since May. The lower oil rig count is a positive development for natural gas prices.
Based on the drilling productivity report from the U.S. Energy Information Administration on February 19, the natural gas production in major US shale regions could rise 19.7% year-over-year in March. Natural gas bears might appreciate the increased supply, which could impact natural gas’s rise.
Energy stocks and energy ETFs
In the trailing week, natural gas–weighted stocks Chesapeake Energy (CHK), Southwestern Energy (SWN), and Range Resources (RRC) returned 9.7%, -0.9%, and 3.8%. During this period, natural gas April futures rose 3.2%.
In the seven days ending on March 19, the SPDR S&P Oil & Gas Exploration & Production ETF (XOP) and the Energy Select Sector SPDR ETF (XLE) rose 3% and 2.2%, respectively. These ETFs contain natural gas producer stocks that could be sensitive to oil and gas rig counts.