Data from oil services firm Baker Hughes showed that the number of rigs drilling for natural gas in the United States stayed unchanged this week, holding at an eight month high of 912.

The gas directed rig count is at its highest level since January 28th 2011 when the total stood at 913. The count is down by 8% from its 2010 peak of 992, its highest since February 2009, when 1,018 rigs were drilling for gas.

Horizontal rigs, the type most often used to extract oil or gas from shale, climbed for a second straight week, rising three to match the record high of 1,140 hit four weeks ago. Horizontal rigs comprise part of the overall gas rig count.

Front month US natural gas futures NGc1, which were up 1.6 cents at USD 3.721 per million British thermal units just before the data was released, showed little reaction to the report.

Some firms have shifted spending away from gas to more profitable liquids or oil related ventures due to relatively low gas prices. The changes have yet to be reflected in industry data, which still show production at record levels.

The US Energy Information Administration expects marketed natural gas production this year to climb to a record high 65.79 billion cubic feet per day, easily eclipsing the previous high of 62.05 billion cubic feet daily in 1973.

Record heat this summer created plenty of power demand, but traders said that high gas production easily offset the surge in cooling needs and several storm related supply cuts.

The gas rig count of 912 remains well above the 800 level some analysts say is needed to cut production significantly and tighten overall supplies.

Most analysts expect no major slowdown in domestic gas output until next year. The gas rig count is about 43% off its record peak of 1,606 from September 2008, and 55 rigs or 6% below the same week last year.

Rising output from shale gas has been the primary driver of increased gas production in the last few years, and most traders agree it will be difficult to tighten the loose gas market unless horizontal gas drilling slows sharply.

Without serious production cuts or a stronger economic recovery to boost industrial demand, which accounts for about 30% of gas consumption, few traders expect much upside in gas prices in the near term. Front month NYMEX gas slid to an 11 month low of USD 3.662 this week.

(Sourced from www.reuters.com)