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U.S. natgas drilling rig count hits 10-year low

Tags: Natural Gas

The number of rigs drilling for natural gas in the United States fell to a 10-year low this week as producers cut back on gas-related drilling operations.

The gas-directed rig count fell for the 10th straight week, down by seven to 663, its lowest since May 2002, data from Houston-based oil services firm Baker Hughes showed on Friday.

The cutbacks in drilling followed a crash in gas prices to a 10-year low, driven by weak winter demand.

Front-month natural gas futures on the New York Mercantile Exchange showed little reaction to the data, remaining about 3 cents higher on the day at $2.308 US per million British thermal units.

Several companies such as Chesapeake, the nation's second-largest gas producer, and Encana (ECA-T), have announced cuts that total more than 1 billion cubic feet per day, or nearly 2 percent of estimated annual production.

Still, most market participants, noting it will be difficult to balance the gas market without serious production cuts, expect no major slowdown in gas output until late this year.

Traders are skeptical as planned reductions so far were not enough to tighten a market oversupplied by as much as 3 bcfd, or more than 4 percent.

Meanwhile, the oil rig count rose by 21 to a 25-year high of 1,317, Baker Hughes data showed.

The oil rig count is 57 percent higher than last year, when only 839 rigs were drilling for the more-lucrative hydrocarbon.

The cutbacks in natural gas production are aiding burgeoning growth in oil production in the nation's shale outposts from North Dakota to Texas. CTV Two CTV News CTV News Channel BNN - Business News Network CP24