August 13, 2010 / 5:33 PM / 10 years ago

UPDATE 2-U.S. natgas rig count hits 18-mth high of 992

 * Gas-directed drilling rig count hits 18-month high
 * Horizontal drilling rig count hits record high
 (Adds graphic)
 NEW YORK, Aug 13 (Reuters) - The number of rigs drilling for natural
gas in the United States hit an 18-month high this week, rising by nine to
992, according to a report on Friday by oil services firm Baker Hughes in
Houston.
 The number is the highest since February 2009 when there were 1,018
rigs drilling for gas.
 Horizontal rigs - the type used to extract gas from shale - rose seven
this week to a record high of 885.
  (Graphic: link.reuters.com/sup34k)
 It was the second straight weekly gain for both gas-directed and
horizontal drilling.
 U.S. front-month September natural gas futures on the New York
Mercantile Exchange NGU0, which were trading in the $4.30 per mmBtu area
just before the report was released at about 1 p.m. EDT, reacted little to
the data, holding at $4.303 per million British thermal units, up 0.7
cent.
 Low gas prices in the first quarter had many expecting gas drilling to
finally slow this year, but the rig count is well above the 850 mark which
some analysts say is necessary to turn year-on-year output negative.
 Rising output from shale gas has been the primary driver of increased
gas production in the last few years.
 Recent EIA estimates put U.S. gas output this year at more than 22 tcf,
its highest level since 1973, and most traders agree it will take a strong
recovery in industrial demand, which accounts for nearly 30 percent of
total gas consumption, to help balance an oversupplied gas market.
 The U.S. natural gas drilling rig count is up 327, or 49 percent, since
bottoming at 665 on July 17, 2009, its lowest level since May 3, 2002, when
there were 640 active gas rigs.
 While the gas rig count is about 38 percent off its record peak of
1,606 from September 2008, it still stands 304 rigs, or 44 percent, above
the same week last year.
 With inventories still high and 2010 gas output likely to reach levels
not seen since the early 1970s, many traders expect gas prices to remain on
the defensive until the economy picks up.
 (Reporting by Joe Silha; editing by Sofina Mirza-Reid)


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