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Tuesday, September 22, 2015

As Drillers Slow Down Thanks to Oil Prices, Natural Gas Supplies Could Run Short

From Bloomberg:
The retrenchment in drilling for U.S. oil is threatening to leave a different market short: natural gas. 
“The impacts of oil rig counts extend beyond oil: the outlook for U.S. natural gas is critically dependent on the outcome of this balancing act in U.S. oil rigs,” Anthony Yuen, a strategist at Citigroup Inc. in New York, said in a report to clients Wednesday. “If the oil market remains oversupplied and oil-rig counts fall, the decline in associated gas production would leave the market short of gas.” 
Associated gas is the gas that comes out of oil wells along with the crude. Supplies of this byproduct from fields including the Bakken formation in North Dakota and the Eagle Ford in Texas may fall by about 1 billion cubic feet a day next year as drillers idle rigs in response to the collapse in oil prices, Yuen said. That’s about 7 percent of U.S. residential gas demand.
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