LONDON, June 6 (Reuters) - U.S. oil and gas production

are finally showing signs of flattening out as drilling rigs and

well completion crews have been idled in response to the retreat

in prices since the middle of 2022.

Nationwide crude and condensates production was running at

almost 13.2 million barrels per day (b/d) in March 2024

according to the latest data from the U.S. Energy Information

Administration (EIA).

However, there had been no net growth since October 2023,

indicating the surge in production after the end of the

coronavirus pandemic and Russia's invasion of Ukraine had ended.

Production from the Lower 48 states excluding federal waters

in the Gulf of Mexico was up by less than 0.5 million b/d in

March compared with the same month a year earlier.

Growth had slowed from 0.9 million or 1.0 million b/d in the

second half of 2023 as the impetus from the previous high prices

in 2022 faded.

Chartbook: U.S. oil and gas production

Inflation-adjusted front-month U.S. futures prices retreated

to around $81 per barrel by December 2022 (50th percentile for

all months since the start of the century) from a high of $124

in June 2022 (83rd percentile).

Production started to stabilise or retreat about 10-12

months later, in line with the historic relationship between

price and output changes.

Clear evidence that U.S. oil production was turning over was

masked by unusual weather in December 2023 and January 2024

distorting year on year comparisons.

But with the return of more normal weather in March 2024 the

lack of net growth over the last six months has become apparent.

OIL STABILISATION?

U.S. futures prices have averaged $73-78 per barrel in May

and June 2024, putting them in the 45-50th percentiles in real

terms for all months since 2000.

At these prices, there is no strong signal to increase or

decrease production.

The number of rigs drilling for oil fell to an average of

just 497 in May 2024 from a cyclical peak of 623 in December

2022.

If futures prices remain around current levels, U.S.

production is likely to remain basically flat for the rest of

2024 through at least the middle of 2025.

Lower prices and limited growth in U.S. output would create

space for Saudi Arabia and its OPEC⁺ allies to reverse some of

their own production cuts later this year and into 2025.

U.S. GAS PRODUCTION

The decline in gas prices since the middle of 2022 has been

even more severe and has brought all growth in production to a

halt.

Dry gas production averaged 102.6 billion cubic feet per day

(bcf/d) in March 2024 compared with 102.9 bcf/d in March 2023.

Dry gas production appears to have peaked at the end of 2023

and has since been trending gently but steadily lower.

Inflation-adjusted futures prices collapsed to an average of

$1.75 per million British thermal units in March 2024, the

lowest for more than three decades, slumping from more than $9

in August 2022.

In consequence, the number of rigs drilling for gas had

fallen to an average of just 115 in March 2024 from a cyclical

high of 162 in September 2022, according to oilfield services

company Baker Hughes.

The number of active rigs has since fallen even further to

an average of just 101 in May 2024 as major producers have

scaled back drilling programmes in response to ultra-low prices.

Unless there is an unexpected rebound in prices, production

is likely to remain broadly flat throughout the rest of 2024 and

2025, helping rebalance the market.

Flat or falling output, combined with strong gas combustion

by generators this summer, colder weather next winter, and an

increase in LNG exports, should eliminate surplus inventories

before the end of winter 2024/25.

Related columns:

- U.S. gas surplus will be eliminated before end of winter

2024/25 (May 8, 2024)

- U.S. oil and gas production rebounds after winter

storm(May 1, 2024)

- U.S. oil and gas output was severely hit by winter storm

(April 3, 2024)

- Record U.S. oil and gas production keeps prices under

pressure(March 1, 2024)

John Kemp is a Reuters market analyst. The views expressed

are his own. Follow his commentary on X https://twitter.com/JKempEnergy

(Writing by John Kemp; Editing by Susan Fenton)