In a Reuters news story about the Energy Information Administration’s (EIA) latest report showing natural gas production fell slightly in February, we get the following graphic which MDN found interesting. It shows the Baker Hughes rig count (number of natural gas drilling rigs) plotted as one line, with the second plotted line representing natural gas futures prices. The natural gas rig count—drilling rigs dedicated to drilling for natural gas in the lower 48 states—is now at a 10-year low. The count as of last Friday was 613, the lowest it’s been since April 2002. Gas prices are also at 10-year lows.
What does it all mean? The less gas that’s drilled for and produced, the more the price will rise—eventually. There’s a lot of extra capacity in the system right now, with inventories at all-time highs. So it’s going to take a while—perhaps years—before prices start to rise again appreciably.
Notice that just four years ago the rig count went over 1,600—when natural gas prices were also flirting with $12 per mmBtu.
*Reuters (Apr 30, 2012) – US Feb natgas output slips from January record-EIA