| Sept 27
Sept 27 The recent rise in U.S. natural gas
prices and decline in coal prices is set to put a dent in demand
for natural gas as some utilities resume using more coal to
A mild winter that left a huge amount of gas in inventory
and record-high natural gas production pushed prices to 10-year
lows in April, luring power companies away from coal.
But the spread between NYMEX Central Appalachian coal and
Henry Hub natural gas futures on Thursday reached its widest in
more than a year as gas prices rebounded from lows plumbed
earlier this year, making gas less of a bargain.
The relative price difference on Thursday reached $1.25 per
million British thermal units (mmBtu), according to Reuters data
-- the widest since August 2011, which could be enough to
discourage more use of natural gas in electricity generation.
Energy traders have said it costs about $1 per mmBtu to
transport Eastern coal, so when natural gas prices are higher
and the coal discount is over $1 per mmBtu, it starts to make
economic sense to burn coal rather than natural gas.
If the coal-to-gas spread reaches $2 mmBtu (with gas $2 more
expensive than coal) it would be the first time it was that wide
since January 2011.
In April, natural gas, historically more expensive than
coal, traded at a 10-year low of $1.902 due to oversupply, while
coal fetched about $2.13, according to the Reuters data. The
22-cent discount was the lowest since 2001.
Since then, gas prices have rebounded to $3.28 per mmBtu,
but coal, which is typically priced per ton, dipped to about $52
per short ton, or the gas price equivalent of $2.03 per mmBtu.
Some power plants are already moving back to coal, a trend
set to increase with gas prices expected to continue rising
ahead of the peak-demand winter heating season.
The biggest U.S. coal-fired power companies include units of
American Electric Power Co Inc, Duke Energy Corp
, Tennessee Valley Authority, Southern Co, Xcel
Energy Inc, NRG Energy Inc, GenOn Energy Inc
and FirstEnergy Corp.