The number of rigs drilling for natural gas in the United States fell 30 to 760 last week, the lowest level in more than six years, according to a report issued on Friday by oil services firm Baker Hughes Inc in Houston.
United States natural gas drilling rigs have been in a declining since peaking above 1,600 last September and now stand about 701 below the same week last year. This is the lowest level since March 2003, when there were 754 gas rigs operating. A huge rally in Natural Gas followed and Natural Gas went from 4 USD in 2003 to 16 USD at the end of 2005.
Traders and analysts have said tight credit and a 70 percent slide in gas prices over the last nine months forced many producers to scale back drilling operations.
Near record-high gas production last year and a deepening recession that sharply cut demand led to a severe oversupply that collapsed gas prices to below the 4 dollars per mmBtu level from their peak above 13 dollars in July.
With the natural gas drilling rig count falling at a record pace this year, most analysts expect year-on-year output declines soon, probably by summer.
Gas rigs are expected to decline another 10 percent or so this year before bottoming at about 700, a level that should turn output negative and help tighten the overall supply-demand balance.
The supply and demand imbalance might set up a good buying opportunity in Natural Gas. You can buy Natural Gas through the United States Natural Gas Fund with the ticker UNG, or buy directly Natural Gas Futures on Nymex.
The UNG ETF is down 68.5% in the last year and down 26% in the last 3 months. Might be a good time to play the rebound in this commodity.
Oil Traders Blog is a website for active online oil futures traders. We provide research and relevant oil and energy related news for the oil trader or daytrader.
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