HOUSTON -(Dow Jones)- The number of rigs drilling for oil and natural gas in the U.S. rose this week as producers put some rigs back to work in anticipation of higher prices.
The number of oil and gas rigs rose to 1,041, up 17 rigs from the previous week, according to data from oil-field services company Baker Hughes Inc. (BHI). The number of gas rigs was 726, an increase of 14 rigs from last week, while the oil rig count was 305, an increase of two rigs. The number of miscellaneous rigs rose by one rig to 10.
The number of gas rigs in use peaked at 1,606 in September 2008. Producers have reined in natural-gas drilling dramatically over the past several months in response to declining prices, but the gas rig count has begun to stabilize as producers bet on colder weather and an economic recovery that would spur demand for the fuel.
The biggest declines have occurred in vertical drilling rigs, which are used to drill straight down into conventional oil and gas reservoirs. The number of vertical drilling rigs has fallen by about 60% over the last year. Horizontal rigs have fallen by a lesser amount. Horizontal drilling has declined by 26% over the year as producers have continued to exploit prolific gas fields known as shales.
Shales are dense rock formations that producers have learned to tap with new drilling technology. Shale formations, such as the Barnett Shale in Texas, have been largely credited with fueling a boom in domestic gas production. Producers must drill down to the rock, then horizontally through the formation, to break it apart and release the gas trapped within.
New supplies from these fields and tepid demand for the fuel resulting from the economic downturn contributed to falling natural gas prices.
Natural gas prices have fallen by more than 60% from their summer 2008 highs above $13 a million British thermal units. Gas supplies, however, have remained abundant. Some analysts expect that storage facilities will approach full capacity - an estimated 3.9 trillion cubic feet - before winter heating season begins. Total gas in U.S. storage for the week ended Oct. 2 stood at an all-time high of 3.658 trillion cubic feet - about 15% above last year and the five year average.
Natural gas for November delivery on the New York Mercantile Exchange was recently down 11.5 cents, or 2.32%, at $4.848 a million British thermal units.
-By Jason Womack, Dow Jones Newswires; 713-547-9201; jason.womack@dowjones.com