"Metallurgical coal, which is used to make steel and is also known as coking coal, has almost doubled in price, climbing from just above US$80 per ton in mid-2007 to more than US$160 per ton today. Thermal coal, which is burned to generate electricity, has risen from the US$45 per ton range to almost US$80 per ton."
Natural gas competes with coal for power generation. Higher coal prices are the primary reason NG prices are holding up, plus more demand this quarter from nuclear plants being down longer for inspections and refueling.
NG prices
Re: NG prices
June 15, 2011
Bearish on US Natural Gas, Bullish on International LNG
by Elliott H. Gue
In early June, US natural gas prices surged to a new 2011 high, up about 20 percent from their nadir in March. Natural gas prices have rallied significantly since mid-May--a stark contrast to the sharp decline in key US and international crude oil benchmarks.
But over the past two and a half years crude oil prices have consistently outperformed natural gas. In fact, the ratio of West Texas Intermediate (WTI) crude oil prices to the price of natural gas hit a record high in March, when the price of a barrel of oil was more than 25 times the cost of one million British thermal units (MMBTU) of natural gas. That’s more than double the 10-year average ratio of less than 10-to-1.
The recent uptick in US natural gas prices has prompted some commentators to speculate that the commodity had finally turned the corner, a move that would begin to normalize the relationship between oil and natural gas prices.
Although the long-term outlook for natural gas demand is strong, this recent move doesn’t mark the beginning of a durable recovery in US gas prices. I expect the amount of natural gas in storage to remain elevated for much of 2011, which should ensure that prices sink to $4 per MMBTU this fall. Investors should focus on names with exposure to oil production and companies that sell equipment and services to natural gas producers.
Investors must distinguish between the North American gas market and the global market for liquefied natural gas (LNG). Although I’m bearish on the near-term prospects for North American natural gas prices, international LNG markets remain one of my top investing themes in The Energy Strategist. [Bullish for FX Energy (FXEN) and GPOR]
Bearish on US Natural Gas, Bullish on International LNG
by Elliott H. Gue
In early June, US natural gas prices surged to a new 2011 high, up about 20 percent from their nadir in March. Natural gas prices have rallied significantly since mid-May--a stark contrast to the sharp decline in key US and international crude oil benchmarks.
But over the past two and a half years crude oil prices have consistently outperformed natural gas. In fact, the ratio of West Texas Intermediate (WTI) crude oil prices to the price of natural gas hit a record high in March, when the price of a barrel of oil was more than 25 times the cost of one million British thermal units (MMBTU) of natural gas. That’s more than double the 10-year average ratio of less than 10-to-1.
The recent uptick in US natural gas prices has prompted some commentators to speculate that the commodity had finally turned the corner, a move that would begin to normalize the relationship between oil and natural gas prices.
Although the long-term outlook for natural gas demand is strong, this recent move doesn’t mark the beginning of a durable recovery in US gas prices. I expect the amount of natural gas in storage to remain elevated for much of 2011, which should ensure that prices sink to $4 per MMBTU this fall. Investors should focus on names with exposure to oil production and companies that sell equipment and services to natural gas producers.
Investors must distinguish between the North American gas market and the global market for liquefied natural gas (LNG). Although I’m bearish on the near-term prospects for North American natural gas prices, international LNG markets remain one of my top investing themes in The Energy Strategist. [Bullish for FX Energy (FXEN) and GPOR]
Dan Steffens
Energy Prospectus Group
Energy Prospectus Group
Re: NG prices
Hot weather prompts households and businesses to run their air-conditioners for longer periods, increasing demand for electricity. In turn, power companies burn more natural gas to keep up with electricity demand.
The National Oceanographic and Atmospheric Association’s (NOAA) summer forecast calls for higher-than-average temperatures for much of southern third of the US; natural gas demand could remain elevated over the next few months.
Nevertheless, this uptick in demand won’t overcome the main challenge facing natural gas prices: excess supply. A surge in natural gas production from unconventional fields such as the Haynesville and Marcellus shale have overwhelmed US demand for the commodity and elevated storage levels.
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I've been looking at several large NG producers and EOG is the only one showing a decline in NG production this year. - Dan
The National Oceanographic and Atmospheric Association’s (NOAA) summer forecast calls for higher-than-average temperatures for much of southern third of the US; natural gas demand could remain elevated over the next few months.
Nevertheless, this uptick in demand won’t overcome the main challenge facing natural gas prices: excess supply. A surge in natural gas production from unconventional fields such as the Haynesville and Marcellus shale have overwhelmed US demand for the commodity and elevated storage levels.
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I've been looking at several large NG producers and EOG is the only one showing a decline in NG production this year. - Dan
Dan Steffens
Energy Prospectus Group
Energy Prospectus Group