Is the Fall In Oil Rig Count Reducing Natural Gas Supplies?


Nov. 20 2020, Updated 3:24 p.m. ET

Natural gas rig count

The natural gas rig count was at 186 last week—one more than the previous week. The natural gas rig count has fallen ~88.4% from its record level of 1,606 in 2008.

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Oil rigs

Between January 2008 and February 2019, US natural gas’s marketed production rose ~52.2% despite the falling natural gas rig count. As a result of the increased supply, natural gas active futures have fallen 67.1% since January 2008. In fact, natural gas–weighted stocks Southwestern Energy (SWN) and Gulfport Energy (GPOR) have fallen 87.6% and 68.9%, respectively.

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 and natural gas–weighted stocks

Between January 4, 2008, and May 24, 2018, the oil rig count more than doubled. Based on the relationship between oil prices and the oil rig count, the oil rig count might fall more. Last week, the oil rig count fell by five to 797—the lowest level since March 30, 2018. The lower oil rig count might slow the natural gas production growth rate. In February, the US natural gas marketed production fell 8.8% compared to the previous month. In February, the natural gas marketed production was 9.1% lower than its all-time high.

The movement might push natural gas higher. In the last quarter, natural gas prices fell 23.1% on a sequential basis. Southwestern Energy and Gulfport Energy’s EPS fell 43.2% and 28.3%, respectively, in the first quarter on a sequential basis.


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