Energy News: Active Natural Gas Rigs Operating at Lowest Level Since Jan 2022

Energy News: March 25, 2024 Active Natural Gas Rigs Operating at Lowest Level Since Jan 2022 Natural Gasis the largest

Energy News: March 25, 2024

Active Natural Gas Rigs Operating at Lowest Level Since Jan 2022

  • Natural Gasis the largest source of power for generation of Electricity; therefore, their pricing is highly correlated, which is why we focus on Natural Gas in our reports.

In our March 11th Energy Update we explained that since 2000, when Natural Gas declined below the cost of production, the average price was always higher long-term:

Energy News

We explained when Natural Gas was below the cost of production producers would respond by making strategic decisions to curtail production to support higher prices in the future, which as we pointed out in our Mar 11th Energy Update, is precisely what large producers like EQT and Chesapeake Energy are doing at this time.

Last Friday, Baker Hughes reported in its closely followed report that America’s energy firms last week cut the number of active Natural Gas rigs to the lowest level since January 2022.

Baker Hughes Active Rig Count

Active Natural Gas rigs have declined 31% from this time last year, going from 162 active rigs to 112 active rigs.

The question is how did Natural Gas respond in Jan 2022 when America’s active Natural Gas rigs were as low as they are today?

Energy News

Past performance does not guarantee future results, but the takeaway is this year with Natural Gas near the lowest prices since 2000, the conditions supporting a major bottom are in place, and although prices could go slightly lower in the near term, based on past history the average price of Natural Gas will likely be much higher long-term.

Energy News

Therefore, if your present energy agreements expire in 2024 or 2025, we recommend you take advantage of this year’s historically extremely low prices, and reserve energy to be available when your present agreements expire.

We believe the average price will be higher long-term, and the upside risk is much greater than the downside potential of waiting hoping for slightly lower prices.

Not every client’s risk tolerance and hedging strategy are the same, but hopefully, today’s report will help put into perspective your risk/reward opportunities. We invite you to call one of our energy analysts to help you plan a hedging strategy appropriate for your situation.

Ray Franklin
Energy Professionals
Senior Commodity Analyst

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