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Crude Oil Up, Natural Gas Down: Analyzing the Impact on Coal (Continued from Prior Part) Natural gas prices
After two consecutive weekly gains, natural gas prices fell last week. While prices rose until Thursday, the expectation of moderation in the warmer weather in the East and Northeast more than offset the gains on Friday. The Henry Hub spot price fell to $2.77 per MMBtu (British thermal units in millions) from $2.81 a week earlier.
During the same period, the front month contract prices fell to $2.77 per MMBtu—compared to $2.82 a week earlier.
Why are these indicators important?
The shale gas boom led to a massive rise in production and a fall in natural gas prices. As a result, natural gas became a competing fuel for coal. It ate away market share from coal in electricity generation.
Natural gas prices and coal’s market share in electricity generation are related. When natural gas prices rise, coal gains market share. It becomes more economical to burn coal for power generation. A fall in natural gas prices generally leads to a fall in coal’s market share because natural gas is available at cheaper rates.
Impact on coal and utilities
A fall in natural gas prices is negative for coal producers (KOL) like Alliance Resource Partners (ARLP) and Natural Resource Partners (NRP). Natural gas becomes cheaper as a fuel in electricity generation. For utilities (XLU) like PG&E (PCG) and Southern California Edison (EIX), the impact depends on the level of regulation. If their contracts are strictly on a cost-plus basis—they get a fixed return over and above costs—the impact isn’t significant. For utilities with fixed-price contracts—they get a fixed price irrespective of changes in input costs—the drop in natural gas prices is positive.
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Natural Resource Partners L.P.
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CODE : NRP |
ISIN : US63900P1030 |
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ProfileMarket IndicatorsVALUE : Projects & res.Press releasesAnnual reportRISK : Asset profileContact Cpy |
Natural Resources Partners is a producing company based in United states of america. Natural Resources Partners holds various exploration projects in USA. Its main exploration property is D.D. SHEPARD in USA. Natural Resources Partners is listed in United States of America. Its market capitalisation is US$ 1.1 billions as of today (€ 1.0 billions). Its stock quote reached its lowest recent point on July 24, 2020 at US$ 10.00, and its highest recent level on January 26, 2024 at US$ 99.99. Natural Resources Partners has 12 241 602 shares outstanding. |