the Baker Hughes rig counts break down into rigs looking for oil and gas. I don't have the numbers in front of me but while the % cuts in oil rigs is very large, there is about a 30% cut in the rigs looking for gas. Bear is mind that gas wells deplete faster than oil wells, so it looks very possible that the production of gas may drop, or at best hold steady, while demand increases. That gas prices are as high as they are, after two very warm winters is remarkable. In '93-'94, also two warm winters, gas dropped to it's all time low, around $1.00. Several experts have projected shortages for a normal winter, which looks like we missed. Over the next 12 months there should be a steady rise in gas prices. The biggest projected source os gas is the Gulf of Mexico, both deep and shallow water. I think this will put a bottom on how far rig activity will drop because gas development has to go on to meet demand. Traditionally, gas is the lowest in the spring, before the summer demand gets going, so there may be a short term dip, though it's holding firm now. MHO
Mike from La. |
