Natural gas prices collapse leads to drilling slow down

Oil Price:

U.S. Natural Gas Drilling Collapses At Fastest Fastest Pace Since 2016

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Baker Hughes reported Friday that exploration companies reduced rigs by 16 to 141 this week. This is the most significant weekly decline since February 2016.



Nabors Industries Ltd., one of the top providers of rigs to shale drillers, warned last month about the fall in rig orders. The rig provider expects a 9% slide in its US rig leases by the end of June. Its bearish forecast comes as prices once commanded more than $10 per million British thermal units in late August 2022 and have since plunged to $2.25.

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Meanwhile, Citigroup Inc. analysts warn some exploration companies are shutting down existing wells due to the supply glut and low prices.





"We expect further reductions across both natural gas rigs and frac fleets in the Haynesville, while throttling and shut-ins are likely to be needed across all basins by the summer," Citigroup's Paul Diamond wrote in a note to clients.



Low natural gas prices plus tighter credit conditions will make it even more challenging for drillers to tap credit lines from big banks. This is the necessary step to correct oversupply conditions.

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This compounds the problem for drillers as Biden makes war on fossil fuels. Natural gas is one of the cleanest of the fuels.

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