Data from oil services firm Baker Hughes showed that the number of rigs drilling for natural gas in the United States slid by 27 last week to a two month low of 907, the second decline in three weeks.
The gas directed rig count, which hit a 9 and a half month high of 936 hit three weeks ago, is down 8.6% from its 2010 peak of 992. That, in turn, was 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, gained two to a record high 1,157. It was the second straight weekly record and the fourth gain in the horizontal count in the last five weeks.
Relatively low gas prices have prompted some companies to shift spending away from gas to more profitable liquids or oil related ventures, but the changes have not been reflected in industry data, which still show production at record highs.
US Energy Information Administration data last week showed August gross natural gas production in the lower 48 US states hit a record high 69.66 billion cubic feet per day. The EIA expects marketed natural gas production this year to rise by 4.2 billion cubic feet per day or 6.7% to a record high 65.99 billion cubic feet per day, easily eclipsing the previous all time high of 62.05 billion cubic feet in 1973.
Record heat this summer triggered plenty of power demand, but traders said high gas production easily offset the surge in cooling needs and several storm-related supply cuts.
The gas rig count of 907 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 late next year.
The gas rig count is 44% off its record peak of 1,606 from September 2008, and 48 rigs or 5%, 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.
(Sourced from www.reuters.com)
