Saturday, March 28, 2009

Natural Gas Drilling Rigs Down from 2003

NEW YORK, March 27 (Reuters) - The number of rigs drilling for natural gas in the United States fell 47 to 810 last week, the lowest level since April 2003, according to a report issued on Friday by oil services firm Baker Hughes Inc in Houston.

U.S. natural gas drilling rigs, which three weeks ago fell below 1,000 for the first time since May 7, 2004, have been in a steady decline since peaking above 1,600 in September.

Traders and analysts have said tight credit and a 70 percent slide in gas prices over the last nine months have forced many producers to scale back drilling operations.

The current gas rig count stands about 637 below the same week last year, and is the lowest for gas drilling rigs since April 25, 2003, when there were 804 gas rigs operating.

Near record-high gas production last year and a deepening recession that sharply cut demand led to a severe oversupply that collapsed gas prices to about the $4 per mmBtu level from their peak above $13 in July.

While first quarter U.S. natural gas production was still expected to be up from the same period last year despite the steady slide in drilling, most industry analysts expect to see year-on-year output declines soon, probably in late spring or early summer, as rigs continue falling.

Gas rigs are expected to decline by another 10 to 15 percent this year to between 700 and 750, a level that should turn output negative and help tighten the supply-demand balance. (Reporting by Joe Silha; Editing by Marguerita Choy)

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