Natural gas rig count
The natural gas rig count was at 194 last week—four more than the previous week. The natural gas rig count has fallen ~87.9% from its record level of 1,606 in 2008.
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Oil rigs impact natural gas prices
Between January 2008 and January 2019, US natural gas’s marketed production rose ~67.1% despite the falling natural gas rig count. As a result of the increased supply, natural gas active futures have fallen 65.6% 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 April 5, 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 rose by 15 to 831 from the lowest level since April 13. However, oil rigs are lower than the multiyear high of 888 in the week ending November 16. 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 March 18, the natural gas production in major US shale regions could rise 18.1% year-over-year in April. 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 4.4%, 4.8%, and -2.7%. During this period, natural gas May futures rose 0.6%.
In the seven days ending on April 9, the SPDR S&P Oil & Gas Exploration & Production ETF (XOP) and the Energy Select Sector SPDR ETF (XLE) rose 1.8% and 0.8%, respectively. These ETFs contain natural gas producer stocks that could be sensitive to the oil and gas rig counts.
On April 9, the natural gas futures for May 2019 closed at a premium of ~$0.08 to the May 2020 futures.
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As of 4:40 AM Eastern Time today, US crude oil active futures were at $51.83, ~4% below their closing level in the previous week. If US crude oil prices stay at those levels today, they'll mark their third week of decline in five weeks.
Amazon is discontinuing its Amazon Restaurants service, which has been delivering food for restaurants in parts of the United States. Amazon Restaurants launched in the United States in 2015 and entered the British market the following year. However, it met strong opposition in the British market.