Tons of Coal, part II: Natural Gas

Coal rebounding is dependent upon natural gas pricing.  As you already know, I think the the key component is the natural gas rig count.  This week the rig count fell by 4 to 518 (Bloomberg).  Baker Hughes sees a fall to 488 by year end (Reuters).  If so, the natural gas price and coal stocks could be ripping.  And I wouldn’t expect the E&P industry to bring the rigs back so quickly after enduring $2 natty for a quarter.

The weather matters a great deal too.  The August heat for burning off the excess natural gas and coal inventory looks good:  NOAA

Price trumps long term.  Competition among fuels for power generation driven by changes in fuel prices from the EIA.

Coal’s share of total net generation continues to decline meaningfully:  EIA

U.S. supply is being rationalized, even if this a tiny lump:  Pa. operator PBS Coals lays off 225, idles 5 mines at SNL.

“US year-to-date coal production totaled 542.0 million st, the agency said, some 5.7% lower than in the comparable period in 2011.”  Platts  More detail from the EIA.

“Coal has also hit bottom and started to rebound as steamy summer weather increase demand utilities burning coal to power air conditioning, the (rail) company’s executives told analysts on a conference call.”  Moreover, if coal comes back the rails would be big beneficiaries:  Reuters.