NEW YORK The number of rigs drilling for natural gas in the United States climbed this week for the second time in three weeks despite relatively low gas prices that continue to squeeze profit margins in most dry gas drilling operations.
The tick up in rig numbers from a 13-year low reached last week may have been spurred by expectations of further gas price gains as the peak-demand winter heating season approaches, traders said.
The gas-directed rig count rose this week by two to 437, data from Houston oil services firm Baker Hughes showed.
It was only the eighth time this year that the gas rig count has gained. The count is still down 53 percent since peaking at 936 last October.
The near steady decline in gas-directed drilling over the last year has fed expectations that producers were getting serious about stemming the flood of record supplies. So far there is little evidence that gas output is slowing.
Baker Hughes also reported that horizontal rigs, the type often used to extract oil or gas from shale, fell for the fifth time in six weeks, shedding 10 to 1,132. The horizontal count is down 5 percent from the record high of 1,193 set in May.
Dry gas drilling may be largely uneconomical at current prices. But the associated gas produced from more profitable shale oil and shale gas liquids wells is likely to keep gas flowing at a record pace for a second consecutive year.
OIL DRILLING DROPS
The oil-focused rig count dropped to its lowest level in four months in the latest week, falling by 12 rigs to 1,398.
Still, this week's oil-rig count was 31 percent higher than a year earlier, according to Baker Hughes data.
The oil-rig count reached a 25-year high at 1,432 in early August.
Oil-directed horizontal rigs represent about 72 percent of the total horizontal count, up from just 53 percent at the start of the year and 45 percent one year ago.
GAS PRODUCTION STILL NEAR RECORD HIGH
U.S. Energy Information Administration data last week showed that gross natural gas production in July climbed 0.4 percent from June to about 72.58 billion cubic feet per day.
Gross gas production is hovering not far below the record high of 72.74 bcf per day hit in January.
Traders have been looking for signs that low gas prices might finally slow record output, but production is still running about 3 bcf per day above the same time last year.
There are concerns that if gas prices move much higher producers could opt to hook up wells that have been drilled but not flowing because gas prices below $3 were unattractive.
The EIA expects marketed gas production in 2012 to hit a record for a second straight year, climbing 4 percent from 2011 levels to 68.86 bcf per day.
Front-month natural gas futures on the New York Mercantile Exchange, which were down 3.6 cents at $3.37 per mmBtu just before the Baker Hughes data came out at 1 p.m. EDT (1700 GMT), edged up about a penny after the report.
(Reporting By Joe Silha and Selam Gebrekidan in New York; editing by Andrew Hay)