| What do recovering crude oil prices mean for coal companies? | |
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Oil prices
The drop in crude oil prices has been in the news consistently since the later half of 2014. Crude oil prices hovered over $100 per barrel in July 2014. Crude oil prices have been falling hard ever since. In a span of less than six months, crude oil prices halved.
While coal and crude oil don’t compete with each other, it’s important for investors to track oil prices. Coal producers (KOL)—like Alpha Natural Resources (ANR), Arch Coal (ACI), Peabody Energy (BTU), and Cloud Peak Energy (CLD)—are affected by falling oil prices. The producers are affected in multiple ways.
Bottomed out?
After falling for months, crude oil prices recovered through the week ending February 6. WTI (West Texas Intermediate) prices averaged $50.65 per barrel for the week—compared to $45.72 per barrel during the previous week. Brent crude prices saw substantial recovery. They recovered to $55.20 for the week ending February 6—compared to $47.13 for the week ending January 30.
During the same week, US crude production dropped marginally. Interestingly, the spread between WTI and Brent increased to $4.55 per barrel last week—the highest in months. The falling rig count may signal a scale back in US crude production, propping up the prices.
Looking at the increased spread, OPEC (Organization of the Petroleum Exporting Countries) members may benefit from production cuts in the US, as we discussed in Market Realist series, Can an award-winning movie explain falling commodity prices?.
Impact on coal
Oil prices’ fall impacts coal and coal producers in multiple ways. On a positive note, coal producers’ fuel costs reduced. Also, falling oil prices led to a reduction in the oil rig count.
Since oil rigs also reduce natural gas, a reduction in oil rigs may lead to lower-than-expected natural gas output. This would increase natural gas prices. Higher natural gas prices may help coal increase its market share in electricity generation. Also, lower oil production can free up rail cars for coal transportation in the PRB (Powder River Basin).
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PRODUCTEUR |
CODE : ACI |
ISIN : US0393801008 |
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ProfilIndicateurs de MarchéVALEUR : Projets & res.Communiqués de PresseRapport annuelRISQUE : Profile actifsContactez la cie |
Arch Coal est une société de production minière de charbon basée aux Etats-Unis D'Amerique. Arch Coal détient divers projets d'exploration en USA. Ses principaux projets en production sont WEST ELK, BLACK THUNDER et JACOB'S RANCH en USA et son principal projet en développement est SPRUCE N° 1 en USA. Arch Coal est cotée aux Etats-Unis D'Amerique et en Allemagne. Sa capitalisation boursière aujourd'hui est 880,5 millions (792,0 millions €). La valeur de son action a atteint son plus haut niveau récent le 27 juin 2003 à 99,96 , et son plus bas niveau récent le 01 octobre 2018 à 0,01 . Arch Coal possède 47 442 200 actions en circulation. |