With a recovery in the coal complex dependent upon some kind of natural gas normalization, note natural gas is in oversupply in two ways: Storage and Supply.
First, natural gas in storage is off the charts per the EIA.
The low natural gas prices have spurred fuel switching by electricity producers from coal to natty to eat the storage overhang.
Secondly, natural gas supply continues to be stubbornly and significantly too high (chart from RBN Energy):
Speculating just when the supply will fall meaningfully is difficult in our brave new world. First the problem was drilling to HBP land. Then the excuse was the drilling to satisfy the new JV earn-in requirements. We know the natty rig count has finally tumbled this year. The dry gas Haynesville Play rig count has collapsed. Unknown has been the industry backlog of drilled but not yet completed wells just itching to keep natty supply propped up. Lately speculation has been that associated gas, natural gas produced out of oil wells, has been keeping supply so high. The oil rig count supports the thesis. Stay tuned…
Meanwhile, several tidbits:
“Coal Stats: US production for week ending 7/07/12 = 18.036 mill.tons; YTD total DOWN 9.9% from 2011″ at the EIA. (I’m still trying to get my arms around these numbers.)
Cliffs high grades their portfolio and keeps liquid: Mining Weekly
China’s coal mining provinces cut output to reduce oversupply at Platts.