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Will the US Natural Gas Rig Count Follow the Long-Term Trend?

Gordon Kristopher

Oversupply Overshadowed the Falling Natural Gas Inventory

(Continued from Prior Part)

Natural gas rig count 

On December 11, 2015, Baker Hughes (BHI) released its weekly US natural gas rig count. Last week, the US natural gas rig count rose by three to 192 for the week ending December 4, 2015. The US natural gas rig count rose for the first time in the last four weeks. In the last two months, the natural gas rig count fell by five.

Impact 

The current natural gas rig counts are 45% less than the level of 344 last year. The natural gas prices and natural gas rig trend are moving in the same direction. They’re following a long-term downward trend. The bearish momentum could push natural gas rigs downward in the short term. The falling natural gas prices will negatively influence natural gas drillers like Superior Energy Services (SPN), Baker Hughes, Schlumberger (SLB), and Halliburton (HAL). These stocks account for 35% of the iShares US Oil Equipment & Services ETF (IEZ).

In its monthly drilling report, the EIA (U.S. Energy Information and Administration) projected that the natural gas production might slow down in January 2016, compared to December 2015, by 365 million cubic feet per day in the key shale regions. Slowing production suggests that oil producers are less optimistic about oil and gas prices.

ETFs like the PowerShares DB Energy ETF (DBE) and the PowerShares DWA Energy Momentum ETF (PXI) are impacted by the volatility in natural gas prices.

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