relationship between coal and nat gas prices

The relationship between coal and nat gas prices is more important than that between oil and gas prices in north America, as both are important fuels in the generation of electricity. Nat gas is particularly important as a peaking fuel, kicking on when demand is high for cooling in the summer. The low price of natural gas has caused quite a bit of coal-to-gas base load switching in recent months – more than expected. This should be helpful for nat gas storage. That said, if natural gas prices rise too much coal will take back market share, affectively capping natural gas prices. Moreover, in the current weak economic environment coal is quite plentiful. The electric power sector has historically high stocks of coal.

Electric Power Sector Coal Stocks



Coal production is coming off in response to high inventories and soft demand but prices are likely to remain weak in the near-term .

U.S. Monthly Coal Production





-M