Saturday, June 6, 2009

Natural Gas Rig Count is Down Again

NEW YORK, June 5 (Reuters) - The number of rigs drilling for natural gas in the United States fell 3 to 700 this week, a fresh 6-1/2-year low, according to a report issued Friday by oil services firm Baker Hughes in Houston.

U.S. natural gas drilling rigs have been in a steady decline since peaking above 1,600 in September, and now stand at about 793 below the same week last year, the lowest level since late November 2002 when there were 695 gas rigs operating.

Tight credit and a 75 percent slide in natural gas prices over the last 11 months have forced many producers to scale back drilling operations.

Near record-high gas production last year and a deep recession that sharply cut demand led to a severe oversupply that has kept gas prices this spring below the $4 per mmBtu level from their peak above $13 last July.

With the natural gas drilling rig count likely to continue to fall in coming weeks, most analysts expect to see year-on-year output declines soon, probably by early summer, which should tighten the overall supply-demand balance. (Reporting by Joe Silha, editing by John Picinich)

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