Why Did Natural Gas Prices Rally 14% in March 2016?
US natural gas rig count
Baker Hughes will release its weekly US crude oil rig count report on Friday, April 1, 2016. Last week, Baker Hughes (BHI) reported that the US natural gas rig count rose by three rigs to 92 rigs for the week ending March 25, 2016—compared to the previous week. So far, the natural gas rig count has fallen by 70 rigs in 2016.
Peak and low
The US natural gas rig count hit 89 rigs on March 18, 2016. It’s the lowest level in the last 29 years. In contrast, the US natural gas rig count peaked at 1,606 rigs on September 12, 2008. Natural gas rigs fell to record lows due to lower natural gas prices. To learn more, read the first part of this series. The US natural gas drilling activity has fallen by 60% since March 2015. The fall in the drilling activity has a negative impact on drillers like Pacific Drilling (PACD), Rowan Companies (RDC), Transocean (RIG), Atwood Oceanics (ATW), and Diamond Offshore (DO). For more information on US energy companies’ financial woes, read US Oil and Gas Companies’ Debt Exceeds $200 Billion and Crude Oil’s Total Cost of Production Impacts Major Oil Producers.
EIA’s monthly drilling report
In its monthly drilling report, the EIA (U.S. Energy Information Administration) stated that the US natural gas drilling activity in the seven major shale regions will decline in April 2016. They’re expected to fall by 450 MMcf (million cubic feet) per day to 46,308 MMcf per day in April 2016 compared to March. In the next part, we’ll discuss the latest natural gas production trends.
ETFs and ETNs like the Guggenheim S&P 500 Equal Weight Energy ETF (RYE), the United States Natural Gas ETF (UNG), the Fidelity MSCI Energy ETF (FENY), the First Trust ISE-Revere Natural Gas (FCG), and the VelocityShares 3x Long Natural Gas ETN (UGAZ) are influenced by the ups and downs in natural gas prices.
Browse this series on Market Realist: