March 12, 2010 / 7:27 PM / 9 years ago

US natural gas rig count up for 11th straight week

* Gas rig count rises for eleventh straight week

* Gas rig count inches to fresh one-year high

NEW YORK, March 12 (Reuters) - The number of rigs drilling for natural gas in the United States rose by one this week to a fresh one-year high of 927, according to a report on Friday by oil services firm Baker Hughes in Houston.

It was the eleventh straight weekly gain and puts the gas rig count at its highest level since Feb. 27, 2009, when there were 970 gas rigs operating.

The U.S. natural gas drilling rig count has rebounded 39 percent since bottoming at 665 on July 17, its lowest level since May 3, 2002, when there were 640 active gas rigs.

While the rig count is still well off its recent peak above 1,600 in September 2008, it now stands at 43 rigs above the same week last year.

Many gas producers scaled back drilling operations earlier last year with credit tight and natural gas cash prices sinking late last summer to about $2 per million British thermal units (mmBtu), a 7-1/2 year low and down some 85 percent from July 2008 highs above $13.

While gas prices are down some 25 percent since their early January highs above $6, they are still more than double their late summer lows, trading in the $4.40s this week, and still high enough to encourage some onshore drilling, particularly in some of the prolific shale basins like Marcellus and Haynesville where break-even drilling costs are below $4.

While drilling is down over the past year or so, traders noted production has not slowed much, with recent government data showing December gross natural gas output fell 0.7 percent from November because of well freeze-offs but was still 0.9 percent above December 2008 levels.

Some traders said rig cuts eventually may be necessary to balance the market unless demand, particularly from the industrial sector, starts to recover with the economy, but few expected to see any significant rig declines unless cash prices crash well below the $4 level. (Reporting by Edward McAllister; Editing by Marguerita Choy)

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