Friday, July 20, 2012

"Coal May Regain Market Share From Natural Gas, Barclays Says"

From Bloomberg:
Coal may regain some market share for power generation from natural gas during the summer as deferred shipments pour in, according to analysts from Barclays Capital Inc.

Cheap gas displaced coal for making electricity earlier in the year, leading to high stockpiles of the fuel and prompting utilities to postpone deliveries, Shiyang Wang, an analyst in New York at the bank, said today in an e-mailed research note.

“Deferred coal shipments also create an additional headwind for natural gas consumption in the U.S. power sector through the summer,” Wang wrote.

Coal producers allowed the deferred shipments in lieu of renegotiating legacy contracts and slashing prices, Barclays said. As the deliveries trickle into utilities and plants also take advantage of lower spot prices for coal, gas demand may wane, according to the investment bank....MORE
On a BTU basis $2.80 gas was ~$8.50 PRB coal.. Most traders assumed utilities wouldn't start switching back to coal until gas reached $3.00 to avoid getting whipsawed if gas prices fell again. $3.033, last.
From the EIA:

Average weekly coal commodity spot prices
(dollars per short ton)
12,500 Btu,
1.2 SO2
13,000 Btu,
<3.0 SO2
Illinois Basin
11,800 Btu,
5.0 SO2
River Basin
8,800 Btu,
0.8 SO2
Uinta Basin
11,700 Btu,
0.8 SO2
15-June-12 $56.10 $64.40 $46.50 $9.15 $35.50
22-June-12 $56.10 $64.40 $46.50 $8.50 $35.50
29-June-12 $56.10 $64.90 $46.50 $8.50 $35.50
06-July-12 $56.10 $64.90 $46.50 $8.50 $35.50
13-July-12 $59.90 $65.10 $47.75 $8.75 $35.60
Source: With permission, SNL Energy
Note: Coal prices shown are for a relatively high-Btu coal selected in each region, for delivery in the "prompt quarter." The prompt quarter is the quarter following the current quarter. For example, from January through March, the 2nd quarter is the prompt quarter. Starting on April 1, July through September define the prompt quarter. The historical data file of spot prices is proprietary and cannot be released by EIA; see SNL Energy