---
title: "Tons of Coal, part II: Natural Gas"
url: https://independentstockanalysis.com/tons-of-coal-part-ii-natural-gas/
description: "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…"
published: 2012-07-20
updated: 2012-07-20
---

# Tons of Coal, part II: Natural Gas

Published 2012-07-20

Posted on

by

J.J. Butler

Coal rebounding is dependent upon natural gas pricing. As you already know, [I think](http://seekingalpha.com/article/726741-coal-introduction-watch-the-ng-rig-count) the the key component is the natural gas rig count. This week the rig count fell by 4 to 518 ([Bloomberg](http://www.bloomberg.com/quote/BAKEGAS:IND/chart/)). Baker Hughes sees a fall to 488 by year end ([Reuters](http://in.reuters.com/article/2012/07/20/energy-natgas-rigs-idINL2E8IK1E720120720)). 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](http://www.cpc.ncep.noaa.gov/products/predictions/30day/)

Price trumps long term. Competition among fuels for power generation driven by changes in fuel prices from the [EIA](http://www.eia.gov/todayinenergy/detail.cfm?id=7090).

Coal’s share of total net generation continues to decline meaningfully: [EIA](http://www.eia.gov/todayinenergy/detail.cfm?id=6550)

U.S. supply is being rationalized, even if this a tiny lump: Pa. operator PBS Coals lays off 225, idles 5 mines at [SNL](http://www.snl.com/InteractiveX/Article.aspx?cdid=A-15334866-12586).

“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](http://www.platts.com/RSSFeedDetailedNews/RSSFeed/Coal/6484667) More detail from the [EIA](http://www.eia.gov/cneaf/coal/weekly/weekly_html/wcpweek.html).

“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.](http://in.reuters.com/article/2012/07/19/unionpacific-idINL2E8IJ2E920120719)