The U.S. Crude Oil Rig Count Is Rising But The Natural Gas Rig Count Is Not
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Supporting Image for Blog Post


View from the Observation Deck 

  1. Today's blog post illustrates the dramatic reduction in the number of active U.S. crude oil and natural gas rigs since energy prices peaked in 2014.
  2. Rig count cuts are generally done in an effort to curb production in response to declining energy prices. Rig counts tend to rise when energy producers sense that higher prices are not only coming, but are sustainable.    
  3. Since the beginning of 2014, the peak (6/20/14) in the price of crude oil was $107.26 per barrel, while the peak (2/19/14) in the price of natural gas was $6.15 per million British thermal units (BTUs), according to Bloomberg.
  4. As of 8/12/16, the price of a barrel of crude oil stood at $44.49 per barrel, down 58.5% from its peak in 2014, while the price of natural gas stood at $2.59 per million BTUs, down 57.9% from its peak in 2014. 
  5. From 6/13/14-8/12/16, the number of active crude oil rigs tracked by Baker Hughes declined by 74.3%, from 1,542 to 396, while the number of active natural gas rigs declined by 73.2%, from 310 to 83, according to Bloomberg.
  6. With respect to the period depicted in the chart, the 83 active natural gas rigs registered on 8/12/16 sat just above the period low of 81, which was posted a week earlier (8/5/16). The 396 active crude oil rigs registered on 8/12/16, however, was up notably from the period low of 316, posted on 5/27/16.
  7. Rig counts are just one barometer investors can use to assess both the crude oil and natural gas markets. U.S. investors should keep in mind that the crude oil market is more global in scope (foreign competition), while the natural gas market tends to be more domestic in scope, in our opinion.

The charts and performance data referenced are for illustrative purposes only and not indicative of any actual investment.

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Posted on Thursday, August 18, 2016 @ 2:03 PM

These posts were prepared by First Trust Advisors L.P., and reflect the current opinion of the authors. They are based upon sources and data believed to be accurate and reliable. Opinions and forward looking statements expressed are subject to change without notice. This information does not constitute a solicitation or an offer to buy or sell any security.