Natural gas drilling drops in line with natural gas prices
Forecast sees prices around $4/mcf until 2010
By Tom Stundza -- Purchasing, 6/10/2009 4:02:00 PM
The number of rigs drilling for natural gas in the U.S. is at 700 this week, a 6 1/2-year low, according to oil services firm Baker Hughes in Houston. With no signs of a pickup in demand or market prices, analysts say the natural gas drilling rig count is likely to continue to fall in coming weeks.
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. A Reuters News market report says 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 natural gas production last year and the deep recession that sharply cut demand has led to the severe oversupply that has kept natural gas prices around $4 per thousand cubic feet, down from their peak above $13 last July.
Some analysts expect to see year-on-year output declines soon, probably by early summer, which should tighten the overall supply-demand balance. However, the latest forecast from the U.S. Energy Information Administration expects the monthly average Henry Hub natural gas spot price to stay at or under $4/mcf until late in the year--“as abundant natural gas supplies converge with weak demand driven by an 8% decline in industrial sector consumption.”
The EIA forecasts the price to increase from an average of $4.13/mcf in 2009 to an average $5.49 in 2010 “as expected economic growth boosts industrial consumption of natural gas.” Historical natural gas price data can be found at Business Intelligence Center - Energy Price Transaction Report in www.purchasingdata.com, Purchasing’s subscription website for commodities prices, leadtimes and business conditions.
See also: Natural gas price forecasts are well under 2008 level
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