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Can Coal Benefit from mid-April Boost to Natural Gas Prices? (Part 1 of 4) April 10 natural gas inventory up slightly
The EIA (U.S. Energy Information Administration) publishes a weekly natural gas inventory and withdrawal report every Thursday for the preceding week. The latest report is for the week ending April 10.
Throughout the year, natural gas is stored underground in order to save the fuel for peak demand during the winter. In the week ending April 10, inventory came in at 1,539 Bcf (billion cubic feet) compared to 1,476 Bcf a week earlier. It was marginally higher than Wall Street analysts’ expectation of 1,529 Bcf.
April 10 inventory was lower than the five-year average of 1,693 Bcf. However, it remained higher than last year’s 850 Bcf. A severe winter in 2014 caused a rapid inventory drawdown.
Why is inventory important?
Commodity prices are a function of demand and supply. If demand increases while supply remains constant, the prices increase because more customers are chasing each unit of the commodity. In contrast, if supply increases for a given level of demand, prices drop because the commodity is available in abundance. So, natural gas inventory data are a useful way to get a sense of natural gas prices in the short term.
Impact on coal
A rise in natural gas inventory is a good indication that winter is over. If inventory is higher than expected, then so is expected supply. This puts pressure on natural gas prices, which is bad for thermal coal.
The falling natural gas prices these last few months has hurt coal producers (KOL), especially the ones with operations in the East and the Midwest, including Alliance Resource Partners (ANRLP), Natural Resource Partners (NRP), and Peabody Energy (BTU). Utilities (XLU) burn more natural gas when prices are low, biting into coal’s share of the electricity generation market.
Continue to Part 2 Browse this series on Market Realist:
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Natural Resource Partners L.P.
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CODE : NRP |
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ISIN : US63900P1030 |
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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. |